Markets & Finance

S&P Says Buy Boeing


Boeing (BA): Maintains 5 STARS (buy)

Analyst: Robert Friedman

As part of Boeing's recent decision to drop ambitions for its Boeing Capital arm to become the next GE Capital, S&P believes the aerospace giant will dramatically curtail its aircraft leasing operations. As such, S&P still is keeping the estimated 10-year free cash-growth rate at 6%, but is upwardly revising the historical six-year average free cash starting point of the

discounted cash flow model from $2.5 billion, to $2.7 billion. This upward revision leads S&P to raise the discounted cash flow-based 12-month target price from $45 to $50, suggesting that Boeing shares are still materially undervalued.

Univision (UVN): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Tuna Amobi

After recently posting a nearly 40% share price gain in 2003, much of the good news on Hispanic Broadcasting (now Univision Radio) deal seems priced in. The third-quarter earnings per share of 16 cents slightly beat high expectations. S&P expects this first Spanish media conglomerate to see cross-platform synergies on the deal, with ratings dominance in high-growth Hispanic demographics drawing marquee advertisers. But with a 16% share dilution, S&P is cutting the 12-month target price to $38, from $40. At 62 times the 2003

price-earnings and 23 times the enterprise-value-to-EBITDA -- both big premiums to its English media peers -- S&P thinks Univision now offers a fair risk/reward profile.

Altera (ALTR): Reiterates 4 STARS (accumulate)

Analyst: Thomas Smith

Following a brighter outlook on the pace of 2004 semiconductor sales from the major trade association, and evidence of ongoing market share gains by PLD chips against non-programmable chips, S&P is raising the earnings per share estimates for programmable-logic maker Altera to 53 cents, from 52 cents for 2004, and to 72 cents from 70 cents for 2005. Applying the present p-e of 44 (based on S&P's 2004 estimate) to the 2005 estimate suggests a potential price appreciation to $32, but S&P's price-sales analysis indicates the potential only to $27. S&P is raising the 12-month target price to $30, from $24.

BEA Systems (BEAS): Maintains 3 STARS (hold)

Analyst: Jonathan Rudy

BEA Systems posted October-quarter pro forma earnings per share of 8 cents, vs. 7 cents, in line with S&P's estimate. Revenues rose 8% to $252 million, but were slightly below S&P's forecast. The company noted disappointing business in the Americas region. S&P is keeping the fiscal 2004 (Jan.) operating earnings per share estimate of 32 cents, but is increasing the fiscal 2005 estimate to 37 cents , from 35 cents. S&P believes that BEA is well-positioned in the integration and portal markets as corporate information-technology spending improves. However, with shares trading at a premium to peers on p-e and enterprise-value-to-sales metrics, S&P would not add to positions.

Dell (DELL): Reiterates 3 STARS (hold)

Analyst: Megan Graham Hackett

Dell announced October-quarter earnings per share of 26 cents , vs. 21 cents, in line with S&P's estimate. Revenues rose 16% to $10.6 billion, a bit above S&P's forecast, led by growth in enterprise sales as server unit shipments rose 30%. The company sees January-quarter revenues of $11.5 billion, which is $160 million above S&P's estimate, and sees earnings per share of 28 cents , in line with S&P's model. S&P is keeping the fiscal 2004 (Jan.) earnings per share estimate at $1.01. S&P's Core earnings per share estimate is 68 cents, reflecting the estimated effect of stock-option expenses. S&P views the shares as fairly valued, based on a discounted cash flow analysis, which yields a 12-month target price of $36.


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