Markets & Finance

S&P Says Buy Intel


Intel (INTC): Maintains 5 STARS (buy)

Analyst: Thomas Smith, CFA

Intel guided June-quarter sales to $8 billion to $8.2 billion from the prior range of $7.6 billion to $8.2 billion; we maintain our model for $8.2 billion. The chipmaker also guided for better gross margin and taxes. We believe marketshare losses last year in flash memory are being recaptured. We are maintaining our EPS estimates of $1.27 for 2004 and $1.70 for 2005 and our S&P Core Earnings estimates of $1.07 and $1.50, respectively. Our 12-month target price is $42.

Mandalay Resort (MBG): Reiterates 5 STARS (buy)

Analyst: Thomas Graves, CFA

Mandalay Resort posted first-quarter EPS of $1.30, vs. 69, 15 cents above our estimate, aided by strength in Las Vegas Strip properties. We are raising our fiscal 2005 (Jan.) EPS estimate to $3.60 from $3.35, and upping fiscal 2006's to $3.95 from $3.60. This excludes possible higher casino taxes in Detroit or the debut of casinos in the Chicago area. We see Mandalay as a good free cash flow story, with dividend boosts, a stock buyback, and debt paydown among possible cash uses. Even with the sharp rise today, Mandalay is at a p-e discount to peers. We are raising our 12-month target price to $70 from $68. The dividend currently yields about 1.8%.

Biogen IDEC (BIIB): Maintains 4 STARS (accumulate)

Analyst: Frank DiLorenzo, CFA

Biogen IDEC and partner Elan filed for European approval of Antegren to treat multiple sclerosis. The FDA filing for MS was in May, and we expect the filing for Crohn's disease in Europe by the end of 2004. With earlier-than-expected Antegren filings for MS and greater visibility for Crohn's, we are raising our peak Antegren sales estimate to $2 billion (split between Biogen IDEC and Elan) by 2014, from $1.5 billion. We still see 2004 EPS at $1.44, but are raising our 2005 EPS estimate by 3 cents to $1.85. On a revised net present-value analysis of the products and pipeline, we are raising our target price by $4 to $72.

Computer Associates (CA): Maintains 3 STARS (hold)

Analyst: Jonathan Rudy, CFA

Computer Associates announced that Sanjay Kumar, the former chairman and CEO and current chief software architect, will be leaving the company effective immediately. We believe that this move should help Computer Associates make progress with the Securities and Exchange Commission and Department of Justice's investigations into Computer Associates' past accounting practices. Given the ongoing investigations, we would not add to positions. However, with our view of an improving balance sheet and solid cash flow from operations, we would hold the shares, which are trading at a discount to peers on a price-to-sales basis.

Boston Scientific (BSX): Reiterates 5 STARS (buy)

Analyst: Robert Gold

Boston Scientific says worldwide sales of its Taxus drug-coated coronary stent totaled $201 million in May, including $157 million in the U.S. and $44 million elsewhere. With 20 selling days in the month, U.S. Taxus sales averaged $7.85 million per day, up from $7.4 million in April. Based on reorder rates, the company believes it continues to hold more than 70% of U.S. drug-coated stent sales. Given its momentum in this category, we are raising our 2004 EPS estimate by 10 cents to $1.75 and 2005's by 20 cents to $2.70. Based on these revisions, we are boosting our 12-month target price by $5 to $59, or to 22 times our 2005 estimate.

Maytag (MYG): Maintains 3 STARS (hold)

Analyst: Amrit Tewary; Efraim Levy, CFA

Maytag warned of weaker-than-expected second-quarter and full 2004 sales and profits, citing lower sales of Maytag and Hoover brand products, reduced production volume, and higher costs. Maytag also announced restructuring plans that it expects will result in charges of $75 to $100 million and annual cost savings of $150 million. We are lowering our 2004 EPS estimate by 21 cents to $2.05 and our 2005 EPS estimate by 34 cents to $2.24. With the shortfall warning, we believe a below-historical p-e of 13 times the estimated 2004 EPS is warranted. We are lowering our 12-month target price to $27 from $31.


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