Markets & Finance

S&P Says Buy Amgen


Amgen (AMGN): Maintains 5 STARS (buy)

Analyst: Frank DiLorenzo, CFA

The FDA approved Amgen's Enbrel to treat psoriasis. S&P sees Enbrel sales of $2.2 billion in 2005. Tomorrow, an FDA panel is to discuss the safety of the company's Aranesp and Johnson & Johnson's Procrit in oncology. S&P doesn't expect any major risks. The next milestone will be the FDA filing for Palifermin to treat mucositis, which S&P sees by the third quarter. S&P thinks Amgen remains compelling at a

price-earnings-to-growth of 1 times S&P's $2.85 2005 earnings per share estimate, compared to 1.7 times for peers. Based on a

discounted cash-flow analysis, the 12-month target price remains $75.

Adobe Systems (ADBE): Downgrades to 4 STARS (accumulate) from 5 STARS (buy)

Analyst: Scott Kessler

In its scheduled May-quarter update, software maker Adobe said it sees revenues of $390 million to $410 million and earnings per share of 39 cents to 44 cents, reflecting strength in Creative Suite and Intelligent Documents offerings. S&P is raising its May-quarter earnings per share estimates to 42 cents, from 39 cents, upping the fiscal 2004 (Nov.) estimate to $1.72, from $1.67, and upping the fiscal 2005 estimate to $1.84, from $1.82. S&P also is increasing the 12-month target price to $50, from $46, based on revised intrinsic and relative analyses. Although the earnings estimates are the Street's highest, S&P is downgrading the stock recommendation based on a less compelling valuation.

Intel (INTC) Xilinx (XLNX), Analog Devices (ADI), Microchip Technology (MCHP), and Vishay Intertechnology (VSH): Reiterates 5 STARS (buy)

Analyst: Thomas Smith, CFA

The Semiconductor Industry Assn. reported March chip sales up 32.3% from a year ago, and 4.4% above February on a three-month moving average basis. S&P observes monthly units moving into record territory and average selling prices breaking out of the low range in place since 2001. S&P sees tight capacity contributing to strong pricing through 2004, and remains positive on the chip outlook, and is projecting industry growth in 2004 to be near 27%.

Wendy's (WEN): Maintains 3 STARS (hold)

Analyst: Dennis Milton

Wendy's reported that April same-store sales increased 8.3% to 8.4% year to year at Wendy's domestic company-owned stores and 6.3% to 6.6% at franchisees. Tim Horton's same-store sales increased 9.0% to 9.2% in Canada and 12.4% in the U.S. These results are in line with recent trends. Sales in 2003 had been materially affected by significant industry price discounting and a weaker U.S. economy. S&P is maintaining its 2004 earnings per share estimate of $2.35, a 15% increase from 2003's $2.05. At 17 times this estimate, a slight premium to peers, S&P believes the burger chain's shares adequately reflect the growth potential.

KLA-Tencor (KLAC): Maintains 4 STARS (accumulate)

Analyst: Colin McArdle

The chip-equipment maker's president and COO Gary Dickerson resigned over the weekend, citing a desire to hold a CEO spot. He's taking a personal leave of absence effective immediately. Dickerson believes from a timing perspective that his goal would most likely be achieved externally. S&P remains bullish on KLA's overall prospects and believes a strong management team remains in place. Current CEO Kenneth Schroeder will assume Dickerson's responsibilities as president. S&P's fiscal 2004 (June) earnings per share estimate of $1.17 remains unchanged.


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