|
Street Talk: Bidding eBay
|
 |
October 20, 2000: 10:48 a.m. ET
Analysts cut drug makers Baxter, AHP; raise SDL; shave Gillette, ground UAL
|
NEW YORK (CNNfn) - Online auction company eBay had a happy Friday after reporting solid third-quarter earnings; analysts upgraded it and continued to rate it as a core Internet holding.
Drug companies, lately considered a safe haven in a turbulent market for technology stocks, suffered after earnings reports -- but not much. Analysts trimmed their expectations for some of the biggest drug makers, but nobody pushed any panic buttons.
eBay a safe port
Goldman Sachs raised estimates for online auction site eBay (EBAY: Research, Estimates), which late Thursday posted third-quarter earnings of 7 cents a share, topping analysts' forecasts of 4 cents.
Goldman raised its 2000 earnings estimate for eBay to 21 cents a share from 19 cents and its 2001 estimate to 36 cents from 35 cents.
"We continue to believe eBay is a core Internet holding with a Recommended List rating," Goldman analysts said in a research note.
Lehman Brothers raised its 2000 earnings estimate for eBay to 22 cents a share from 19 cents and reiterated its "buy" rating.
"Due to its superior business model and impressive growth prospects, eBay remains our only 'buy' rated stock (in the Internet sector)," Lehman said in a research note.
Paine Webber raised its 2000 estimate for eBay to 21 cents a share from 19 cents and kept its "buy" rating, but cut its price target for the shares to $95 from $142 due to an anticipated increase in volatility in the e-commerce sector.
"(eBay's) results were achieved in a seasonally weak quarter," analyst Sara Farley said in a research note. "We believe this momentum will continue into eBay's seasonally strongest quarters (the fourth quarter of 2000 and first quarter of 2001), potentially providing some additional near-term upside for the stock."
WR Hambrecht analyst Derek Brown maintained his "buy" rating on eBay and raised his 2000 earnings estimate to 21 cents a share from 18 cents and his 2001 estimate to 37 cents from 36 cents.
"We continue to view eBay as a core Internet holding," Brown wrote in a research report. "However, we are still struggling to find a meaningful near-term catalyst and believe that the company is entering a more mature phase of its growth cycle that could limit potential upside in future quarters."
eBay shares were up $3.94 to $61.13 in Friday morning trading.
Drug reaction
Goldman Sachs lowered its 12-month price target on Baxter International (BAX: Research, Estimates), to $90 from $95. Shares of the health care products maker fell sharply Thursday after the company warned that a weak euro would negatively affect earnings in 2001.
Goldman also lowered its 2001 earnings estimate for Baxter to $3.40 a share from $3.52. But Goldman raised its 2000 earnings estimate for Baxter to $3.07 from $3.06.
Goldman analyst Lawrence Keusch continued to rate Baxter's shares as "market outperformers."
Although the outlook for Baxter's fourth quarter looks solid and operating fundamentals have not worsened, management lowered 2001 earnings guidance to low double-digit growth from the mid-teens, primarily as a result of the decline in the euro, Keusch said.
"Lowered guidance is entirely the result of currency. We believe that Baxter shares are very attractively valued following yesterday's (Thursday's) correction," said Keusch.
Paine Webber also lowered its 2001 estimates for Baxter to $3.43 a share from $3.55. Analyst Dave Lothson cut his price target for Baxter shares to $100 from $110.
"The short-term disappointment of lower 2001 earnings growth tied to a weak euro in no way reduces corporate momentum," Lothson said in a research note.
Lehman Brothers reiterated its "buy" rating and $100 price target on another drug maker, Eli Lilly (LLY: Research, Estimates), which Thursday reported third-quarter earnings that matched Wall Street estimates.
Lehman also reiterated its "buy" rating on the No. 5 U.S. drug company, American Home Products (AHP: Research, Estimates), which also reported earnings in line with analysts' forecasts on Thursday. However, Lehman lowered its 2000 earnings estimate slightly to $1.89 a share from $1.90, since AHP's profit of 58 cents a share was actually a penny below Lehman's forecast.
Paine Webber also cuts its 2001 earnings estimate for AHP to $2.20 a share from $2.22.
Good techs
Laser maker SDL (SDLI: Research, Estimates), a merger target of fiber-optics component maker JDS Uniphase (JDSU: Research, Estimates), benefited from reporting third-quarter earnings that beat Wall Street estimates by seven cents a share.
ABN Amro raised its 2000 earnings-per-share estimate for SDL to $1.51 a share from $1.35 and its 2001 estimate to $2.51 from $1.97.
"The company's fiber-optics business remains red hot," ABN Amro's research note said. The company is continuing to expand capacity to meet strong demand, the note said.
Credit Suisse First Boston raised its fourth-quarter earnings estimate for SDL to 49 cents a share from 44 cents and its 2001 estimate to $2.50 from $2.
WR Hambrecht reiterated its "arbitrage positive" rating -- a rating between "neutral" and "buy" -- on SDL and raised its 2000 earnings estimate to $1.47 a share from $1.36 and its 2001 estimate to $2.57 from $2.
Who's got Hot Stocks? We've got Hot Stocks.
Hambrecht cut estimates and the price target on e-business consulting firm Scient (SCNT: Research, Estimates), which reported fiscal second-quarter earnings Thursday that edged Wall Street estimates by a penny a share.
Analyst Greg Gore raised his 2001 estimate to 33 cents a share from 32 cents, but lowered his 2002 estimate to 60 cents from 69 cents because Scient lowered its revenue growth expectations. Gore cut his 2001 revenue estimate to $434.3 million from $444.9 million and his 2002 revenue estimate to $627.4 million from $718.9 million.
Gore cut his price target on Scient stock to $35 from $50, but kept his "buy" rating on the shares.
"This price target still implies substantial upside," Gore wrote in a research report. "We believe that Scient is among a handful of companies that can successfully execute on the huge opportunity in the Internet services market."
Lehman Brothers raised its earnings estimates for Agilent (A: Research, Estimates) after the chip maker entered an equipment financing and leasing agreement with The CIT Group (CIT: Research, Estimates).
Lehman raised its 2000 estimate to $1.49 a share from $1.32 and its 2001 estimate to $2.27 from $2.
"We view (the CIT) agreement favorably," Lehman said in a research note. "It allows Agilent to reduce its financial risk associated with equipment leases, and increases the company's opportunities for incremental equipment revenues."
Grounding United Airlines
Paine Webber cut United Airlines' parent UAL (UAL: Research, Estimates) after it said Thursday that it lost a greater-than-expected $64 million in the third quarter before one-time items due to flight cancellations and delays and higher costs for fuel and wages.
Paine Webber cut its rating to "neutral" from "attractive," cut its 2000 earnings estimate to $3.30 a share from $4.80, and cut its 2001 estimate to $4 from $6.20.
"With one to two loss quarters ahead, plenty of airline stocks selling at six times fiscal 2001 estimates, no 2001 fuel hedge in place, (and) significant potential additional dilution associated with the proposed US Airways (U: Research, Estimates) merger, we cannot justify retaining a recommendation on UAL shares," analyst Sam Buttrick wrote in a research note.
Close shave for Gillette
Goldman Sachs said it was encouraged by the ouster of Gillette (G: Research, Estimates) chief Michael Hawley, but said there is still a risk the razor and consumer product company's earnings estimate could be lowered because of weak trends at its Duracell battery unit.
The assessment came one day after Boston-based Gillette removed Hawley as chairman and chief executive and reported slightly lower third-quarter earnings.
"We view this as encouraging in that it is the first step toward addressing one of our two greatest concerns -- execution. This could go a long way toward improved results over the next several years," Goldman said.
Goldman kept its "market outperform" rating on the stock and left unchanged its 2000 earnings estimate of $1.20 and its 2001 estimate of $1.33. Goldman's fourth-quarter estimate remains at 35 cents a share.
 "However, we continue to believe there is risk of further downward revisions due to persistently weak trends at Duracell," it said. "In our view, and confirmed by management, there is not likely to be a quick fix. This, coupled with continued weakness in the euro, could continue to temper earnings near-term."
UBS Warburg did cut its rating of Gillette, to "hold" from "strong buy," and it cut its price target to $35 from $37.
"We consider the board action to seek a new CEO a welcome harbinger of future shareholder-friendly change, but near-term results are our immediate concern," Warburg said in a note.
Merrill Lynch kept its "accumulate" rating on Gillette, but cut its 2000 earnings estimate to $1.18 from $1.20 and its 2001 estimate to $1.30 from $1.35.
United Technologies, Honeywell uniting?
Analysts reacted to the news that manufacturing companies United Technologies (UTX: Research, Estimates) and Honeywell (HON: Research, Estimates) are discussing a possible merger.
Lehman Brothers reiterated its "buy" rating on United Technologies, and raised its 2000 earnings estimate to $3.54 a share from $3.50 and its 2001 estimate to $4.07 from $4.05.
Lehman said it thought the deal would be consummated and would be good for United Technologies shareholders. "The combined (company) would be very strong, but during the deal review period, Honeywell should be discounted relative to the deal price, making it a cheaper way to own United Technologies," Lehman said in a research note.
Merrill Lynch thought the potential merger would benefit Honeywell shareholders. "We view the news favorably for Honeywell investors as the combination should allow for the quicker repositioning of assets in order to boost returns and growth in a timely manner," analyst Phua Young said in a report. 
-- compiled by Mark Gongloff from staff and wire reports
|
|
|
|
|
 |
|
