Dow Jones (DJ ) Maintaining 3 STARS (hold)
Analyst: William Donald Donald sees 2001 earnings per share at $1.10 including $0.14 in unusual charges. He sees ad softness likely to continue through the second quarter of 2002 but says DJ will be an early beneficiary when demand recovers.
The company posted third quarter earnings per share of $0.19 vs. $0.39 loss, including $0.01 & $0.94 of unusual net losses. Revenues dropped 21%. DJ sees across-the-board ad softness continuing in the fourth quarter with revenues down 21% to 25%, earnings per share $0.25 to $0.35. 2002 margins are helped by $150 million cut in fixed costs, lower paper usage and easing prices. DJ said it was too early to give guidance on 2002, but Donald anticipates partial recovery to $2.00.
Pacific Sunwear (PSUN ) Downgraded to 2 STARS (avoid) from 3 STARS (hold)
Analyst: Maureen Carini
Carini cut the company to 2 STARS as she suggests avoiding the shares until there is evidence of meaningful rebound in sales. She cut her fiscal 2002 (Jan.) earnings per share estimate by $0.14, to $0.73 and fiscal 2003 EPS estimate by $0.19 to $1.02.
September same-store sales fell 7.1%. Even excluding impact of terrorist attacks, results were significantly below plan. Although sales rebounded somewhat in week following tragedy, negative trends returned as month went on. Weakness is seen in all operating units, Carini says. She is concerned about high inventory levels that will likely lead to discounting and margin erosion.
Yahoo! (YHOO ): Reiterate 1 STAR (sell)
Analyst: Scott Kessler
Yahoo's pro forma third quarter earnings per share was $0.01 versus $0.13, less than Kessler's $0.02 estimate. Sales fell 44% from last year, 9% from second quarter and were 5.1% below his projection. Margins weakened notably.
Kessler is reducing his already low 2001 forecasts for sales by 5% to $690 million and earnings per share estimate to $0.02 from $0.07. He is lowering his 2002 revenue growth estimate to 20% from 25% and earnings per share estimate from $0.16 to $0.07.
Despite talk of increased focus on non-advertising revenue sources, Kessler has yet to see discernable results from services besides Corporate Yahoo. The company is in a tough market and the analyst believes the share price -- at 161 times S&P's 2002 earnings per share estimate -- is far too high.
Genentech (DNA ): Still STARS (hold)
Analyst: Frank DiLorenzo
Third quarter product revenues of $449 million were $14 million better than S&P's projection and reflected very strong Rituxan sales of $213 million. Pro forma earnings per share estimate of $0.20 was a penny above S&P's estimate. The company had a good third quarter on the strength of Rituxan, but sales growth of other products, including Herceptin, was less than optimal.
Pipeline progress has also been mixed, notes DiLorenzo, with recommendations for Tracleer treatment for pulmonary hypertension offset by Xanelim psoriasis drug delay. DiLorenzo sees 2001 earnings per share at $0.77 in 2001, $0.91 in 2002 and $1.11 in 2003. On earnings per share growth rate multiples compared to the company's peers, he feels Genentech is fairly priced.