Markets & Finance

S&P Says Buy Sysco


Sysco (SYY): Maintains 5 STARS (buy)

Analyst: Anishka Clarke

Foodservice distributor Sysco posted March-quarter operating earnings per share of 30 cents, vs. 26 cents, a penny below S&P's 31 cents estimate. Sales rose 9.9% on 4.3% real growth, food cost inflation of 5.2%, and 0.4% from acquisitions. In S&P's opinion, higher operating leverage from efforts to improve efficiencies and productivity at the delivery level, and lower expected inflation, should lead to further margin expansion in the remainder of fiscal 2004 (Jun.) and beyond. S&P maintains the fiscal 2004 earnings per share estimate of $1.38, and sees fiscal 2005 earnings per share of $1.64. S&P is raising the 12-month target price to $48, from $45, on a historical p-e of 29 times the fiscal 2005 earnings per share estimate.

Aventis (AVE): Maintains 3 STARS (hold)

Analyst: Herman Saftlas, David Seemungal

Aventis accepted a sweetened bid from French drugmaker Sanofi-Synthelabo to acquire Aventis for about $64 billion, about 14.6% higher than Sanofi's previous bid. The terms call for 1.6667 Sanofi American depositary Shares plus cash of 20 euros for each Aventis ADS. Novartis said it will not submit a revised offer for Aventis. A Sanofi/Aventis combination will create the world's third largest drugmaker, with strengths in heart and oncology drugs. The deal should also yield synergies expected to reach $1.9 billion by 2006. S&P maintains the 12-month target price of $78, which represents a modest increase from the value of the new Sanofi offer.

Clear Channel Communications (CCU): Maintains 3 STARS (hold) and Viacom (VIA.B) 43.30 ): Maintains 5 STARS (buy)

Analyst: Tuna Amobi, CFA, CPA

According to the Radio Advertising Bureau, radio revenues grew a combined 10% in March, on 11% and 5% gains in local and national markets, after a 1% February gain and a flat January. As expected, the data affirms anecdotal evidence that bookings are occurring earlier in the cycle. S&P maintains the 2004 radio outlook for about 7% growth as national converges with local, and as firmer pricing interplays with modest unit growth. S&P notes, however, the stocks of Clear Channel and Viacom have lately been exposed to broadcast indecency enforcement actions by the Federal Communications Commission and Congress.


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