): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)
Analyst: William Donald
Dow Jones says it still sees 42 cents fourth-quarter earnings per share in spite of a mixed advertising market. For 2004, S&P expects improving advertising demand and strong operating leverage to contribute to an earnings per share rebound to $1.50, vs. the 95 cents that S&P sees in 2003. Dow Jonese shares relapsed about 8% in November and are up some 8% year-to-date, underperforming peers and major indices and reflecting investors' uncertainty about the timing and strength of sustained ad recovery. Based on a
discounted cash-flow analysis, S&P is keeping the 12-month target price at $58, which offers an attractive opportunity to accumulate the shares.
Monster Worldwide (MNST
): Reiterates 1 STAR (sell)
Analyst: Mark Basham
Monster shares are higher following a sell-side analyst's upgrade. The analyst's comments include the scalability of Monster's revenue model, citing the 1999-2000 increase in the unit's operating profit margin from 5%, to 24%. However, S&P thinks that with the Monster unit's operating profit margin in the third quarter already at 21%, there's limited potential upside to margins, particularly with CareerBuilder taking over AOL and MSN accounts and a job picture that's arguably less robust than during the 1999-2000 period. S&P's 12-month target price remains $13.
Constellation Brands (STZ
): Reiterates 5 STARS (buy)
Analyst: Anishka Clarke
S&P thinks the mid-teens growth in wines imported into the U.S. since 2002 supports the view that cheaper high-quality wines continue to find appeal in the domestic market. S&P sees further increases in imports over the medium term. Accordingly, S&P sees the timely BRL Hardy (Australia) acquisition providing product breadth to Constellation Brand's wine portfolio and distribution scale economies. Given the improving wine outlook, S&P is raising the 12-month target price to $42. from $38.
Fair Isaac (FIC
): Downgrades to 4 STARS (accumulate) from 5 STARS (buy)
Analyst: Scott Kessler12/10/2003
S&P believes that recent news about lower mortgage origination and refinancing activity adds increased uncertainty to the Fair Isaac story. S&P thinks demand for business analytics will continue to increase and that Fair Isaac is a leader in the emerging category of Enterprise Decision Management. With a fiscal 2004 (Sep.)
price-earnings of 18.6 and a p-e-to-growth ratio of 1.0, Fair Isaac trades at a notable discount to its peers, and its shares remain attractively valued. Based upon a revised discounted cash-flow analysis, S&P is reducing the 12-month target price by $13, to $58.
): Maintains 4 STARS (accumulate)
Analyst: Yogeesh Wagle
The auto-supplies retailer reported November-quarter earnings per share of $1.35, vs. $1.04, topping S&P's estimate by 6 cents. Total sales rose 5%, and same-store sales increased 1%, both below S&P's expectations. Operating margin expanded 130 basis points. S&P thinks AutoZone should see improving sales trends in the January quarter, sparked by sales initiatives and overall improvement in consumer spending. At 14 times S&P's $6.52 first-quarter 2005 (Aug.) earnings per share estimate, raised from $6.45, the shares trade below peers and the S&P 500. S&P is trimming the 12-month target price to $105, from $115, or about 16 times first-quarter 2005's estimate -- in line with S&P's three-year earnings per share growth forecast.
Verizon Communications (VZ
): Maintains 3 STARS (hold)
Analyst: Todd Rosenbluth
Verizon plans to take fourth-quarter and first-quarter charges resulting from a sizable workforce reduction. S&P is lowering its estimates of Standard & Poor's Core earnings per share (which include relatively large pension adjustments), by 81 cents, to $1.03 for 2003, and by 26 cents, to $1.81 for 2004, to reflect the higher charges than expected. In addition to S&P's earnings quality concerns, S&P sees Verizon challenged by increasing competition from wireless and cable. However, with its shares trading near S&P's 12-month target price of $32, based on a blend of discounted cash-flow and relative analysis, S&P would hold the shares.
Capital One (COF
): Reiterates 5 STARS (buy)
Analyst: Mark Morgan
Capital One reportd that its November net chargeoff rate rose to 5.57%, from 5.30% in October, reflecting seasonally higher losses. Results were in line with S&P's expectations. The 30+ day delinquency rate dropped to 4.46%, from 4.52%, which S&P sees resulting in lower credit losses in 2004. Receivables rose by $757 million in November, vs. an $828 million rise in October. S&P thinks the shares are undervalued at just 10.3 times S&P's 2004 earnings per share estimate of $5.60. S&P's 12-month target price remains $75, based on shares trading at 13.4 times S&P's 2004 estimate, which is in line with its peer multiple average. S&P continues to recommend investors purchase the shares.