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Still Accumulate Halliburton

Halliburton (HAL):

Raised to 4 STARS (accumulate)

Analyst: Tina Vital

The oil company reported a Q3 EPS of $0.42 vs. $0.29, before special items, in line with the Street consensus. Sales were up 12%. Operating income increased 38% as earnings from energy services segment rose 41% on strong drilling activity and better pricing, but was partly offset by 15% drop in engineering and construction. The company believes its potential asbestos liability is adequately covered by insurance and reserves, sees 2001 EPS $1.28, 2002's at $1.47. With longterm outlook strong, and shares off 52-week highs by 40%-plus and trading near 1998 valuation lows, Halliburton is attractive.

Lockheed Martin (LMT ):

Keep 3 STARS (hold)

Analyst: Robert Friedman

S&P is maintaining a hold despite expectations the Pentagon will award the joint strike fighter program to the world's largest military weapons contractor. If they get the nod, it would produce first 22 planes for a total of $20B over the next few years. But big money won't be made unless Congress okays full production phase, and it remains to be seen if lawmakers will approve the huge $220B program. The defense industry is littered with ambitious military programs begun, only to be scrapped by Congress in later years. S&P calculates LMT trading at premium to sustainable cash flow growth.

JDS Uniphase (JDSU):

Still 2 STARS (avoid)

Analyst: Ari Bensinger

Before special charges, the company reported Sep-Q loss per share of $0.03 vs. EPS of $0.18, in line with reduced Street guidance. Sales were down 45% from June-Q on weak telecom spending and high channel inventory. Book-to-bill under one. The company also guided Dec-Q down 10%-15% from Sep-Q, and expects it will be bottom. They also noted cutting cost structure for breakeven at quarterly revenue below $350M. Sees annual realignment savings at $800M, $100M ahead of schedule. Cash flow from operations positive $66M, cash position solid at $1.6B. But avoid at over 10X our lowered fiscal year 2002 sales estimate.

American Power Conversion (APCC): Maintain 3 STARS (hold)

Analyst: Richard Stice

The company reported Q3 pro-forma EPS $0.19 vs. $0.29, $0.01 below S&P estimate. Revenue was down 9% amid weak IT spending climate. Gross margin narrowed 420 basis points as cost inefficiencies offset slightly more favorable product mix. The company is scheduled to begin production at new Brazilian facility in Q4. Visibility remains poor, and the company offers no Q4 guidance. S&P lowered 2001 EPS estimate by $0.05, to $0.70, 2002 by $0.03, to $0.90. Although economy continues to hinder product demand, okay to hold American Power Conversion at only 15 times our 2002 estimate, below peers. The company manufactures uninterruptible power supply (UPS) devices, surge protectors and other related products.

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