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Boston Scientific Still a 'Strong Buy'

Boston Scientific (BSX): Reiterates 5 STARS (strong buy)

Analyst: Robert Gold

Boston Scientific trimmed its 2003 earnings per share guidance, mostly on higher R&D and SG&A spending ahead of planned launch of the Taxus drug-coated stent in the U.S. We have made no change to our second-quarter EPS estimate of 29 cents, but we are cutting our full 2003 operating EPS estimate by 14 cents, to $1.16, to reflect expected margin compression, slightly reduced European Taxus sales and lower U.S. Express stent sales than modeled. Revenue guidance for 2004 remains about in line with our $3.2 billion to $3.4 billion projection, and we still see 2004 EPS of $2.85 on an increasingly bullish drug-coated stent sales outlook.

Siebel Systems (SEBL): Reiterates 3 STARS (hold)

Analyst: Jonathan Rudy. CFA

Siebel expects second-quarter earnings per share of 2 cents, below our 7-cent estimate, with revenues of $330 million to $334 million and license revenue of $110 million, also below our estimates. The company cites unexpected delays in purchasing decisions due to the economic climate and turbulent software industry. We are lowering our 2003 EPS estimate to 15 cents, from 20 cents, and look for 22 cents in 2004. Despite disappointing second-quarter execution, Siebel trades at a discount to peers at 3.2 times sales, and has nearly $4.50 per share in cash and short-term investments and little debt. We would hold the shares.

Documentum (DCTM): Downgraded to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Scott Kessler

The company says its second-quarter revenue and earnings per share will be lower than the Wall Street forecast. It expects revenues of $68 million and EPS of 7 cents, below our estimates of $72 million and 8 cents, respectively. Its EPS is before amortization of stock-based compensation (5 cents) and purchased intangibles (1 cent). Documentum attributes the shortfall to a challenging economic climate, delays in government spending, and inconsistent execution in Northern Asia. We are surprised by this announcement; we would hold Documentum shares but recommend accumulating shares of FileNet (FILE) and Open Text (OTEX).

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