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Still Buy Pfizer


Pfizer (PFE): Reiterates 5 STARS (buy)

Analyst: Herman Saftlas

The drug maker's new treatment for serious fungal infection and aspergillosis will be available in oral and I.V. formulations. Pfizer expects the drug to receive FDA and EU clearances before yearend. Peak sales are projected at about $500 million. S&P sees Pfizer leading the big-pharma sector in terms of EPS growth, boosted by its strong patent-protected drug portfolio and impressive R&D pipeline. Pfizer is valued at a modest premium to the big-pharma multiple, but sells at marked discount to peers on a price-earnings-to-growth basis.

Boeing (BA): Upgrades to 5 STARS (buy) from 2 STARS (avoid)

Analyst: Robert Friedman

The giant commercial aicraft/weapons maker has a long history for an erratic EPS and a mediocre return on equity. Looking ahead, S&P continues to forecast very modest demand growth for Boeing's passenger jets. Moreover, given the mature market profile and substantial leverage of Boeing's airline customers, S&P doesn't see Boeing regaining pricing power in the near term or long term. Despite the potential for a big near-term uptick in U.S. defense spending, the weapons-making industry also is a mediocre generator of EPS growth and return on equity. However, the recent market selloff has Boeing trading at a 30% discount to fair value.

Sun Microsystems (SUNW): Maintains 3 STARS (hold)

Analyst: Megan Graham Hackett

Sun sees an operating loss per share of $0.05-$0.07 vs. the Street's mean loss of $0.04. The company sees revenue of $2.7-$2.9 billion, below S&P's $3.3 billion estimate, though year-ago revenues rose 60%. Sun cited the weak global economy and the impact from the September 11 tragedy. As expected, while the company had resisted job cuts, it now announced a 9% reduction. S&P believes Sun will need a deeper cut than this to align its cost structure to the realities of this environment.

Advanced Micro Devices (AMD): Reiterates 3 STARS (hold)

Analyst: Thomas Smith

The chipmaker reported September quarter revenue down about 22% from the June quarter, compared to a 15% drop foreseen earlier AMD now sees a pro-forma net loss per share of $0.26-$0.31, vs. the Street's consensus for a $0.12 loss. The company cited very aggressive price competition for PC processors as the cause of disappointment. Unit volume for processor sales were as expected. S&P reviewing its estimates for downward adjustment. The price war with Intel is well known. Shares trade well below the tangible book value near $11, implying limited downside risk. S&P is neutral on AMD pending an industry recovery in the second half of 2002.


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