On CLS, PLXS, SCI, JBL, LIZ, ACF, APW, BHE, CKFR, SANM SAN FRANCISCO, Nov. 13 /PRNewswire/ -- The following is being issued by Robertson Stephens, a member of the National Association of Securities Dealers, CRD number 41271: Rating Changes Celestica Inc. (NYSE: CLS) ($54.75) Strong Buy J. Keith Dunne, Electronic Manufacturing Products and Services "We are raising our rating to Strong Buy from Buy to reflect the most attractive valuations since the Fall 1999, despite continuously exceeding expectations leading to a 35% increase in our fiscal 2001 Cash EPS estimates in the past four months," said Dunne. "At 29 times forward P/E estimate, CLS is trading well below our expected 40% growth rate for 2001. Importantly, we believe exposure to Cisco and Dell, two OEMs garnering increased scrutiny these days, is only 6-8% each and business remains robust at SUNW, in our opinion. We expect internal sales growth to accelerate to 41% in fiscal 2000, up significantly from 29% last year. Currently, we estimate internal sales gains of closer to 20-25% in fiscal 2001, though our estimates could prove to be conservative depending upon the pace of new program wins, especially for communications customers such as Lucent, and the success the company has in integrating and ramping production at the recently acquired IBM sites. Contrary to recent articles in the press, we do not believe Celestica was a serious contender for acquiring NatSteel, though we believe management is interested in expanding its presence in Asia." Plexus Corp. (Nasdaq: PLXS) ($49.38) Strong Buy J. Keith Dunne, Electronic Manufacturing Products and Services "We are raising our rating to Strong Buy from Buy to reflect the most attractive valuations since the Fall 1999 and acceleration in internal growth from an estimated 32% in fiscal 2000 to an estimated 47% growth in fiscal 2001," said Dunne. "In contrast, the company is trading at only 31 times our calendar 2001 Cash EPS. We believe Plexus has industry-leading engineering, design and complex assembly capabilities, which is allowing the company to generate among the highest margins and returns on invested capital in the industry. We believe management is successfully integrating recent acquisitions that have significantly expanded geographic reach, service capabilities, and customer diversification. We expect further transactions may lead to increases in our sales and Cash EPS estimates. We believe management has become much more aggressive in its efforts to expand into higher-end communications and medical applications and has sprinkled its customer mix with leading venture-backed companies that could follow Arrowpoint's footsteps and become major customers over the next 4-6 quarters." SCI Systems, Inc. (NYSE: SCI) ($36.44) Strong Buy J. Keith Dunne, Electronic Manufacturing Products and Services "We are raising our rating to Strong Buy from Buy, though readers of our October 13 report should realize this is largely a formality to reflect our initial use of this rating for the EMPS industry," said Dunne. "We continue to believe the company is undergoing significant fundamental positive changes backed by a much broader and deeper management team that we had the pleasure of meeting with in early November. We continue to believe our fourth quarter 2001 sales of $3.3 billion is achievable assuming the recent Ericsson programs ramp as scheduled and add about $500 million in incremental sales in the fourth quarter of 2001. We also expect the company to largely achieve our December sales estimate of $2.5 billion and find it amusing that two months ago, the Street believed a $10.5 billion sales year was unachievable, only to start believing the target was too conservative a few weeks later, when the $2 billion agreement with Ericsson was announced. We believe SCI is likely to begin assembling port adapters for Cisco with additional PCBA and full system assembly programs likely to be announced over the next year. Given the 50-60% growth that Cisco has discussed, we expect Cisco could become a top 10 customer in the next fiscal year. Currently, SCI is trading for 17 times our calendar 2001 Cash EPS, nearly 40% below its peers despite having an end- market mix that is less PC centric and more attractive than Solectron, post the NatSteel acquisition." Jabil Circuit Inc. (NYSE: JBL) ($44.25) Buy J. Keith Dunne, Electronic Manufacturing Products and Services "We are increasing our rating to Buy from Long-Term Attractive to reflect the most attractive valuations since the Fall 1999, despite the fastest rate of internal sales growth in the industry," said Dunne. "At 35.7 times our forward P/E estimate, JBL is trading well below our expected 48% internal sales growth rate for 2001. We believe the increase in raw inventory levels at Cisco could be positive for Jabil by lowering the prospect that tight component availability may restrict near-term growth. Additionally, we are not expecting significant growth in Dell following a significant ramp in notebook computer production in fiscal 2000. We believe Jabil may have the strongest relationship in the industry with Lucent, a major communications OEM we believe is on the verge of a major outsourcing program. Recently, the CEO of Jabil joined me in a panel before top Lucent executives to discuss changing business models and the need for speed. We suspect Jabil is near the top of the list for significant levels of new business opportunities with Lucent. We believe major plant expansions are progressing on plan, though startup expense are likely to restrict EPS growth by up to a few cents per quarter over the next several quarters, especially if the company wins significant new business. We expect the company to continue actively seeking acquisition partners, though none are in our forecast given management's rigorous criteria." Estimate Changes Liz Claiborne, Inc. (NYSE: LIZ) ($41.56) 2000 EPS: $3.58 from $3.60 Long-Term Attractive Janet Joseph Kloppenburg, Specialty Retailing/Apparel Manufacturers "After a conversation with management of Liz Claiborne on Friday, we are fine- tuning our fiscal 2000 estimate by $0.02 from $3.60 to $3.58," said Kloppenburg. "We note that our fourth quarter 2000 estimate of $0.96 versus $0.85 remains unchanged. However, our newly revised fiscal 2000 estimate reflects the timing of the share repurchase throughout fiscal 2000. Thus, due to the treatment of the calculation of weighted shares outstanding throughout the fiscal year, we are revising our fiscal 2000 estimate. We also note that the company has $116 million left in their current share repurchase authorization. We are maintaining our fiscal 2001EPS estimate of $4.00, which represents 11.4% EPS growth. LIZ currently trades at 10.4 times our fiscal 2001, relatively in line with our long-term secular growth rate of 12%. We rate the shares Long-Term Attractive." Comments AmeriCredit Corp. (NYSE: ACF) ($26.31) Buy Jordan Hymowitz, eCredit & Lending/I-Auto Justin Hughes, Financial Services "AmeriCredit trades at a 23% discount to the credit card companies despite improving credit quality, better profitability, and faster growth," said Hymowitz and Hughes. "We have raised our 2001 EPS estimates four times this year and have raised our estimates 22 times since initiating coverage of the company in December of 1994. AmeriCredit priced its most recent securitization at a weighted average of 6.8%, 27 bps better than last quarter's securitization. In addition, the company has recorded 15 consecutive quarters of record earnings. We reiterate our Buy rating on the shares with a price target of $44." APW Ltd. (NYSE: APW) ($43.00) Buy J. Keith Dunne, Electronic Manufacturing Products and Services "We believe APW has successfully transitioned itself into a leading global provider of enclosure solutions with unmatched engineering and design capabilities and the broadest geographic footprint in the industry," said Dunne. "We believe the company has successfully integrated 18 acquisitions to date and has established a core marketing capability targeting 22 key customers that can carry the company well into this century. APW has a diversified customer base with the top 10 accounting for about 40% of sales and the leading customer nearer 7%, though we believe new programs with SUNW could lead to the first 10% customer. Currently, about 50% of sales are derived from integrated solutions versus 32% for bare enclosures, 11% for thermal management products and 7% for power supplies and backplanes. On 9/27/00, we raised our fiscal 2001 Cash EPS from $2.15 to $2.40 and introduced a fiscal 2002 estimate of $3.30, implying a forward P/E of 16 times, which we believe is attractive especially given its positive cash flow and an increasing number of acquisition candidates in the market place. We are maintaining our Buy rating and expect the current 40% discount to the large EMS companies to shrink towards 20% over the coming year." Benchmark Electronics (NYSE: BHE) ($36.38) Buy J. Keith Dunne, Electronic Manufacturing Products and Services "We believe margins and earnings should continue to increase as Benchmark continues to ramp a record number of significant new programs with leading OEMs in instrumentation, medical, enterprise storage and workstation markets, in our opinion," said Dunne. "We expect internal growth to approximate 40% in fiscal 2000 and fiscal 2001, significantly above the estimated 8-10% rate achieved in fiscal 1999. We believe the integration of AVEX is complete and that management is continuing to seek an Asian footprint, but is being highly selective to ensure a rapid and smooth transition. In the most recent quarter, inventory turns and DSOs were better than expected, further indicating the company's ability to fund rapid growth, despite a tight component environment. We are maintaining our Buy rating on Benchmark, which is trading at less than 15 times calendar 2001 Cash EPS and only 5.3 times EBITDA, well below recent acquisition prices for companies with a smaller geographic footprint and fewer design, engineering and complex manufacturing skills." Checkfree Corp. (Nasdaq: CKFR) ($54.14) Buy Andrew Jeffrey, eProcessing/ePayment "We are reiterating our Buy rating on CheckFree and believe investors should become increasingly aggressive in owning the shares," said Jeffrey. "Our conservative DCF analysis implies that the stock can attain a near-term valuation in the low-$70s and a 12-month target approaching $100. Recent events suggest that CheckFree's competitive position is being bolstered by two key market events: the withdrawal of Metavante's proposed IPO, coupled with evidence of weakening business trends at the margin, and recent rumblings within Spectrum, the bank-backed B2C EBPP consortium. We observe increased evidence that banks are once again spending aggressively on financial technology in an effort to update systems and offer sticky applications aimed a bolstering customer retention. We contend that proof of concept is an essential prerequisite to sustainable economies of scale and high ROIC. As such, we contend that CheckFree represents the only 'real' ePayment investment opportunity today, which should support a relative premium valuation. We recommend aggressive purchase of CKFR shares." Sanmina Corp. (Nasdaq: SANM) ($93.44) Buy J. Keith Dunne, Electronic Manufacturing Products and Services "We believe Sanmina is one of the best managed companies in the industry with a very successful record of identifying and integrating acquisitions, both OEM asset divestitures and industry competitors," said Dunne. "On October 24, we increased our EPS estimates 15-20% to reflect broad-based sales gains and greater incremental benefits and synergies from the integration of Hadco, one of the world's leading PWB fabricators. Currently, PWBs represent less than 25% of sales, though we believe management has plans to significantly expand capacity to serve internal needs without cutting off current third- party customers. Importantly, if PWB markets soften unexpectedly, we believe Sanmina could shift much of the production to internal uses. We expect internal revenue growth to remain 40-45% in fiscal 2001 and represent about 90% of the total growth, assuming no further acquisitions, which we believe is unlikely given a cash position of nearly $1.3 billion and management's proven skill in identifying and integrating accretive acquisitions. We are maintaining our Buy rating. Based on our EVIC/ROIC and forward P/E valuation metrics, Sanmina has traded at current valuations only four times since late 1998." Industry Updates EMPS Industry J. Keith Dunne, Electronic Manufacturing Products and Services "We believe the EMS industry is within 5% of the trough reached in Fall 1998, based on our Enterprise Value to Invested Capital/Return on Invested Capital (EVIC/ROIC) timing metric relative to its 12-month moving average," said Dunne. "In addition, the forward P/E is 25% below the 12-month average and 37% below the level achieved at the end of the third quarter of 2000 compared to 26% below the 12-month average in the fall of 1998. We believe the mid-1998 trough was the result of significant Asian currency devaluations in late 1997. Interestingly, in the last 26 quarters, the EMS industry has lost more than 5% only two times-during the uncertainties surrounding the Asian currency devaluation and the current presidential election. We believe the fundamental growth drivers for the EMS industry are intact with outsourcing by major OEMs continuing at a torrid pace; the PWB book to bill remaining above parity and in synch with underlying electronic equipment demand; and component availability becoming more predictable, though some custom ASICs and other components could continue to cause temporary shipment delays." Unless otherwise noted, prices are as of Friday, November 10, 2000 Robertson Stephens maintains a market in the shares of Cisco Systems, Dell Computer, L.M. Ericsson, Sun Microsystems, CheckFree Corp., Sanmina, and Plexus and has been a managing or comanaging underwriter for or has privately placed securities of AmeriCredit, Benchmark, Celestica and Solectron within the past three years. Robertson Stephens, Inc. and its international affiliates ("Robertson Stephens") is the leading full-service investment bank focused exclusively on growth companies. The firm provides a comprehensive set of investment banking products and services, including equity underwriting, sales & trading, research, M&A advisory, convertible securities, private capital, equity derivatives, and corporate and executive services. 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Copyright * 2000 Robertson Stephens. SOURCE Robertson Stephens (FBF CLS PLXS SCI JBL LIZ ACF APW BHE CKFR SANM) CO: Robertson Stephens; Celestica Inc.; Plexus Corp.; SCI Systems, Inc.; Jabil Circuit Inc.; Liz Claiborne, Inc.; AmeriCredit Corp.; APW Ltd.; Benchmark Electronics; Checkfree Corp.; Sanmina Corp. ST: California IN: FIN SU: RTG
Robertson Stephens Daily Growth Stock Update
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