Markets & Finance

S&P Says Hold General Motors


General Motors (GM): Maintains 3 STARS (hold)

Analyst: Efraim Levy

If it can complete the $4 billion sale of its Hughes Electronics operations in 2003, GM hopes to have its U.S. non-executive pension plans almost fully funded by year-end. S&P is raising the 2004 earnings per share estimate by 30 cents, to $5.52, to reflect faster improvement in pension funding than S&P previously expected. Although GM will still have a sizable added pension and other post-retirement obligations, S&P expects the improved status to help its valuation. Based on a comparative

price-earnings analysis, S&P has a target price of $50, up from $47. The 4% dividend yield adds to the total return.

AmeriTrade (AMTD): Reiterates 3 STARS (hold)

Analyst: Robert Hansen

The online broker Friday reported opening 15,000 net new accounts, and reported average daily volume of 180,000 trades during November -- above S&P's estimates. AmeriTrade raised its earnings guidance guidance to a range of 37 cents to 59 cents in fiscal 2004 (Sep.) -- 2 cents higher -- and upped the 14 cents estimate to 17 cents for the December quarter. S&P thinks Ameritrade is gaining market share, particularly among active investors. S&P's fiscal 2004 earnings per share estimate goes to 60 cents, from 55 cents, but the target price remains $15, which is 25 times S&P's fiscal 2004 estimate. S&P wouldn't add to positions given the premium valuation, potential price competition, and market volatility, which can affect trading volumes.

Halliburton (HAL): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: James Kartsonas

News that the great majority of the asbestos claimants have accepted the proposed plan for reorganization of certain units coincides with reports of a Pentagon investigation that Halliburton may have overcharged the U.S. government for fuel sales in Iraq. Though S&P sees the possibility that any wrongful dealing in Iraq might negatively impact Halliburton, the asbestos news increases S&P's confidence in that issue being resolved by mid-2004, which S&P thinks will help narrow the valuation gap between the oil explorer and its peers. S&P is raising the target price to $29, from $27.

Watson Pharmaceutical (WPI): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Phillip Seligman

Watson received a subpoena from the Department of Health and Human Services for documents related to company-sponsored physician meetings in 2002-03, with respect to its anemia drug Ferrlecit. This, after news of a promising nail fungus therapy failing one Phase III trial and of rivals forming a generic oral contraceptive pact, means Watson has three new overhangs. S&P still sees 2004 earnings per share of $2.11, but on the string of adverse news and the likelihood of slower long-term growth, S&P is cutting the estimated forward p-e to 22 from 23, resulting in a 12-month target price of $47, which is reduced from $49.

Adobe Systems (ADBE): Reiterates 3 STARS (hold)

Analyst: Scott Kessler

The software maker posted November-quarter earnings per share of 34 cents, vs. 17 cents -- 2 cents above S&P and the Street's estimates. Revenues rose 22%, compared with S&P's 17% projection, on 40% growth in the ePaper segment and upside from the CS suite released in September. S&P is raising the January-quarter earnings per share estimate by 2 cents, to 32 cents, and fiscal 2004's (Nov.) by 2 cents, to $1.33. S&P's fiscal 2004 earnings per share forecast reflects revenue and operating margin projections above Adobe's guidance, which S&P believes is conservative. Based on a revised

discounted cash-flow analysis, S&P is raising the 12-month target price by $4, to $45.


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