Accenture (ACN): Upgrades to 4 STARS (buy) from 3 STARS (hold)
Analyst: Stephanie Crane
Accenture posted November-quarter earnings per share of 32 cents, vs. 33 cents, one cent ahead of our estimate. Net revenue rose 14% to $3.7 billion, with double-digit gains in financials and products, and strength in consulting (64% of revenues). We see the solid momentum as especially positive, given prior weakness. Demand for outsourcing is also solid, with pricing and attrition stabilized, two factors which bode well, in our opinion, for future growth. We are raising our fiscal 2005 (ending August) earnings per share estimate to $1.37 from $1.33, and our 12-month target price by $2 to $30, based on a peer p-e ratio of 19 times our fiscal 2005 earnings per share estimate of $1.55.
Berkshire Hathaway (BRK.A): Maintains 3 STARS (hold)
Analyst: Catherine Seifert
We think the shares could come under some pressure today on news that the New York State Attorney General subpoenaed Berkshire Hathaway's General Re unit for information related to the unit's sale of non-traditional or loss mitigation insurance products. This subpoena essentially mirrors a request for information from the SEC in late December. At 22 times our $3900.00 earnings per share estimate for 2005, we view the shares as appropriately valued compared with peers. However, our outlook is tempered by heightened reinsurance price competition, as well as by the headline risk associated with the regulatory investigations.
UTStarcom (UTSI): Maintains 3 STARS (hold)
Analyst: Aryeh Bensinger
Reflecting lower sales in China, UTStarcom sees fourth-quarter sales of $740 million to 745 million, with a loss of 40 cents to 45 cents, below prior $875 million to $885 million guidance and our breakeven earnings estimate. Results were hurt by a maturing fixed mobility market and changes in senior management at the main carriers in China. We are lowering our 2004 earnings per share estimate to 35 cents from 73 cents, and 2005's to $1.50 from $1.90. We are reducing our 12-month target price to $18 from $20, or 12 times our 2005 earnings per share estimate, a 50% discount to peers, which we believe adequately reflects UTStarcom's high reliance on the volatile Chinese market.
DoubleClick (DCLK): Reiterates 3 STARS (hold)
Analyst: Scott Kessler
DoubleClick preannounced fourth-quarter revenues and earnings per share that were higher than we expected, reflecting strength in the company's TechSolutions segment. DoubleClick expects revenues of $81 million to $82 million and earnings per share of 6 cents to 7 cents. We are raising our fourth-quarter projections for revenues from $74.5 million to $81.0 million, and our earnings per share estimate to 6 cents from 4 cents. We are also increasing our 2005 earnings per share forecast to 24 cents from 21 cents, owing to indications of favorable demand for online advertising and benefits accruing to DoubleClick. Nonetheless, we believe DoubleClick is reasonably valued based on our discounted cash-flow analysis.
Viacom (Class B) (VIA.B): Reiterates 3 STARS (hold)
Analyst: Tuna Amobi, CPA, CFA
We view the appointment of Brad Grey as Chairman/CEO of Paramount Pictures, replacing Sherry Lansing, as consistent with the studio's turnaround strategy. While Grey has never run a major studio, we think he brings a solid entertainment industry track record, with notable TV production hits like The Sopranos, and vital relationships with "A-list" Hollywood talent. While Grey should lead efforts to revamp theatrical production and marketing, we also expect Paramount to increasingly leverage sister MTV's younger-skewing demo, and like other majors, aggressively tap into the DVD market.