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Still Hold Yahoo! as New CEO Is Chosen

Yahoo! (YHOO): Maintains 3


Analyst: Scott Kessler

On Tuesday morning, Yahoo! announced that Terry Semel, one-time co-CEO and co-chairman of Warner Bros., will lead the company starting May 1. Semel brings experience in running global filmed entertainment and music businesses. The choice of Semel underscores the company's focus on content and its distribution and monetization, as well as its intent to remain an independent concern. Interestingly, current chairman and CEO Tim Koogle will be vice chairman until August 1. The move offers some stability to Yahoo!'s uncertain future.

Johnson & Johnson (JNJ): Reiterates 4 STARS (accumulate)

Analyst: Herman Saftlas

Q1 EPS is up 14% to $1.06, $0.02 above consensus. Revenue rose 6.5%, despite a 3.6% drag from adverse foreign exchange. Drug sales rose 9.8%, which was less than expected because of a sharp drop in Propulsid and reductions in Floxin and Ultram. But sales were better than expected in stents, orthopedics, glucose monitoring and contact lenses. S&P is raising its full 2001 estimate $0.05 to $3.75. This includes a $0.10 dilution from the planned acquisition of Alza Corp. Alza's drugs should help offset competition to Procrit, Risperdal and Floxin, and S&P thinks shares of Johnson & Johnson are attractive at a modest discount to the drug group's price-to-earnings multiple.

Edison International (EIX): Maintains 5 STARS (buy)

Analyst: Justin McCann

After a $2.5 billion charge for uncollected purchased power costs, Edison posted a 2000 loss of $5.84 vs. EPS of $1.79. Excluding the charge, its operating EPS would be $1.74, which does not include costs of deferred power purchases. S&P expects the regulatory commission and legislature to ultimately approve Edison's memorandum of understanding with the governor, which would enable Southern California Edison to recover both prior and prospective costs. While a possible voter referendum could be a problem, S&P thinks Edison's upside potential is far greater than the downside risk.

Cisco Systems (CSCO): Maintains 3 STARS (Hold)

Analyst: Megan Graham-Hackett

Cisco announced a Q3 shortfall: the company sees EPS in the low single digits vs. Wall Street's $0.08 mean estimate and S&P's $0.07 forecast. Cisco sees revenue of $4.7B vs. S&P's estimate of $5.3B and Wall Street's $5.95B on the ongoing slid in the telecom sector. As expected, the company will write down excess inventory on service provider gear components, but at $2.5B, the size was larger than expected. Cisco will take a $800M-$1.2B restructuring charge, with headcount cut to save $1B/year. While the news is disappointing, some had expected a Q3 loss. S&P is cutting fiscal 2001 (July) estimate by $0.08 to $0.43. With bad news out, at 37 times the fiscal 2001 forecast, this networking leader is worth holding.

Lincare Holdings (LNCR): Maintains 5 STARS (Buy)

Analyst: Robert Gold

Lincare posted a 20% gain in Q1 operating EPS, to $0.60, in line with S&P's estimate. Revenues were ahead 20%, on both organic and acquisition-fueled growth. EBITDA margins were flat at 39.3%. Cash flow in the quarter totaled nearly $50M, allowing for $35M in debt paydowns. Two acquisitions consummated in the quarter should add $10M to Lincare's revenue base, and the pipeline of attractive candidates is full. S&P still sees 2001 EPS of $2.70, rising to $3.25 in 2002. This consistent 20% EPS grower trading at discount to services group. S&P expects a higher valuation once the status of Medicare oxygen reimbursement rates is clarified.

Millipore (MIL): Maintains 3 STARS (Hold)

Analyst: Stewart Scharf

The company posted $0.59 Q1 EPS (before $0.48 restructuring charges and other costs) vs. $0.56, a bit above revised forecast following the company's previous EPS warning. Revenue growth, at 9%, was impacted by 5% forex effect on weak yen and euro. A spinoff of the company's microelectronics unit is planned for Q2. Bioscience is benefiting from demand for biotech drugs, new products, and life sciences. With microelectronics sales down 15% sequentially, S&P sees further softness due to industry downturn. S&P is cutting our 2001 estimate by $0.35 to $2.40, 2002's forecast by $0.50 to $2.60. S&P now sees only 8% EPS growth, and views the stock as fairly valued with p-e on par with market at 21.

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