Goldman Sachs upgraded its investment rating on Storagetek (STK) to market outperform from market perform after the company posted $0.36 fourth-quarter EPS (pro forma).
Analyst Laura Conigliaro says that over the past three quarters, Storagetek's improved execution and efficiency have enabled it to beat EPS estimates on little revenue growth. She says this should also be the basis for continued margin improvement in the company's financial model over the next several years, moving 2001 operating margins of 4.7% closer to 10% in 2003, on only low-to-mid single digit top-line growth. In the fourth quarter, EPS of $0.36 beat her $0.28 estimate and consensus forecast of $0.31 on mix-driven higher gross margin. Conigliaro raised her $0.75 2002 EPS estimate to $0.85 and sets a $1.10 estimate for 2003. She has a $27 price target on the stock.