Providian Financial (PVN)
Downgrades to 2 STARS (avoid) from 4 STARS (accumulate)
Analyst: Robert McMillan
Providian expects EPS of $0.19 to $0.21 in its Sept. quarter, much lower than the Street's expectation of $0.82 to $0.84. The lowered guidance reflects higher loan loss provisions, lower fee and finance charge revenue than expected and higher credit losses than expected. Adverse trends stem from terrorist attacks and slowing economy, but the magnitude is worrisome. The analyst is reviewing his estimates. Although Providian is trading near historic low valuations, S&P recommends avoid shares until evidence emerges that business momentum is improving and credit losses are subsiding.
Maintain 3 STARS (hold)
Analyst: Efraim Levy
As the carmaker announces restructuring of its freightliner heavy trucks operation, it will incur $330 million in charges, with a goal of $850 million in aggregate savings in 2004. About $370 million is expected to come from material costs, $120 million from production efficiencies, $170 million from overhead reductions and $190 million from improvements to business model. S&P expects the North American heavy-duty truck market to remain depressed in 2002, with price pressure amid excess inventory of new and used vehicles. But commercial vehicle operations should see profit in 2001 before unusual items.
Juniper Networks (JNPR):
Maintains 3 STARS (hold)
Analyst: Megan Graham-Hackett
Juniper posted third-quarter pro forma EPS of $0.10 compared with $0.17, above our $0.09 estimate and the Street's $0.07. The results were solid, though upside came from lower R&D spending. Revenues were in line with our estimate of $202 million, which is about flat compaed with a year ago and second quarter. Gross margin was in line at 60% compared with 65%, and 60% in the second quarter. Juniper notes a solid win rate, better international sales and a stable pricing environment. It sees flat fourth quarter revenues flat compared with third quarter and EPS of $0.10. While it is executing well in a difficult market and positioned for upturn, at 46 times analyst's $0.45 2002 EPS forecast, rating remains a hold.
RSA Security (RSAS):
Downgrades to 3 STARS (hold) from 4 STARS (accumulate)
Analyst: Jonathan Rudy
RSA posts a third-quarter operating loss per share of $0.10 compared with EPS of $0.16, one penny below Street's consensus. Results were more disappointing than we had expected after their Oct. 1 warnings. The company blamed the September 11 attack for a drop-off in business, but the slowdown was likely to continue well into 2002. Rudy is lowering his 2001 and 2002 operating EPS estimates to $0.24 and $0.31, respectively from $0.35 and $0.50. The stock is trading at 33 times his 2002 estimate, but with Internet security leadership, and at historically cheap 2 times sales, would hold.
Electronics For Imaging (EFII): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)
Analyst: Richard Stice
The company posts third-quarter pro-forma EPS of $0.25 compared with $0.37, a penny above Street consensus. Revenues were down 17%, hurt by weakness in Europe. Gross margin was up sequentially from second quarter on favorable pricing and product mix. Analyst is lowering 2001 EPS estimates by $0.05, to $0.90, and for 2002, by $0.08, to $1.05. While positive on the company's position in the color and high-speed printing market, analyst is cautious near-term amid extremely weak demand for office products. Though trading at only 16 times 2002 estimates, upside is limited and would not add to positions.