Upgrading Sensormatic Electronics to Buy

Also: analysts' opinions on Disney and Ultratech Stepper

Sensormatic Electronics (SRM ): Upgrades to 5 STARS (buy) from 4 STARS (accumulate)

Analyst: James Corridore

Conglomerate Tyco international has agreed to buy the company. Sensormatic stockholders will get $24 per share in Tyco stock, a 61% premium to Thursday's closing price. S&P is upgrading Sensormatic to put the ranking in line with S&P's buy recommendation on Tyco, since the acquisition is an all-stock deal. S&P thinks the acquisition of Sensormatic provides Tyco with the natural extentsion of its home security business, since Tyco is acquiring a leader in retail anti-theft, digital video and closed circuit TV sectors. Given the large premium in the deal, there's likely no problem gaining approval of shareholders.

Disney (DIS ): Maintains 4 STARS (accumulate)

Analyst: Thomas Graves

Before special items, pro forma Jume-quarter EPS was $0.23 vs. $0.23 one year earlier, a penny above estimates. On the same basis, S&P looks for $0.81 EPS for fiscal 2001 (Sept.). S&P is trimming the fiscal 2002 estimate to $0.90 from $0.95, based on recent weakness in TV advertising and U.S. theme parks, and on expected dilution from the Fox Family acquisition. S&P expects the fiscal 2002 EPS rise to come entirely from a change in accounting for non-cash amortization, but looks for prospects from international park openings and DVD growth to help bolster the stock. Disney is attractive with an estimated enterprise value of 13 times the projected fiscal 2002 EBITDA.

Ultratech Stepper (UTEK ): Initiates with 3 STARS (hold)

Analysts: Robert Tortoriello

The specialty maker of photolithography machines ("steppers"), which are used to project circuit patterns onto semiconductor wafers, has maintained earnings during an industry downturn. The company now is entering rapidly growing markets, such as bump-processing for semiconductors and microsystems, where the primary competition is older contact-printer technology. S&P likes the prospects of this niche player, but sees shares fairly valued at 36 times the 2002 EPS estimate of $0.64, 3.5 times the 2002 sales estimate, and 2.5 times the tangible book value.

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