Morgan Stanley cut its estimates on Smurfit-Stone Container (SSCC).
Analyst Edings Thibault says management guided to a 22 cents to 25 cents first-quarter loss -- well below his previous 10 cents first-quarter loss estimate. He notes a timing issue on postemployment benefits resulted in a 3 cents greater than expected negative impact on first-quarter earnings per share.
Thibault notes Smurfit-Stone's earnings are highly leveraged to containerboard markets, which he believes hit the bottom in December, 2003. He notes Smurfit-Stone is trading at 9 times his 2005 earnings per share estimate.
Thibault says investors should use the selloff as a buying opportunity. He cut the 30 cents 2004 earnings per share estimate to 10 cents, and trimmed the $2.00 2005 estimate to $1.90. He has a $20 target, and rates the shares as equal-weight.