Halliburton (HAL ) : Downgrades to 1 STAR (sell) from 2 STARS (avoid)
Analyst: Tina Vital
The oil exploration company posted EPS of $0.33 vs. $0.28, before special items, in line with the Street. EBITDA fell 13% from Q3 on lower Halliburton Energy Services (HES) earnings, offset by a 56% jump in Engineering & Construction (E&C). S&P expects HES income to drop 20%+ in 2002, while E&C may see some gains. S&P sees 2002 EPS at $1.12, and sees 2003 at $1.35. While Halliburton's balance sheet is strong and believes it is adequately insured and reserved, with the asbestos liability difficult to quantify and likely to limit share appreciation, S&P would sell Halliburton.
Qualcomm (QCOM : Maintains 5 STARS (buy)
Analyst: Ari Bensinger
The provider of digital wireless technology posted December quarter EPS of $0.23 vs. $0.23, in line with estimates. Sales rose 15% from the September quarter. The company reduced its fiscal 2002 (Sept.) EPS guidance to $0.90-$0.97, from $1.10-$1.20. Given the weak mobile market data points, a lower forecast is expected. Also, $0.12-$0.16 of reduction is due to an accounting change, for a net reduction of $0.07- $0.08. S&P believes investors should focus on Qualcomm's attractive long-term growth profile. Its Code Division Multiple Access (CDMA) technology will dominate next-generation mobile phones. Even with lower guidance, Qualcomm is trading at an attractive price-earnings-to-growth rate of 1.4 times its fiscal 2002 estimates. The discounted cash flow analysis fair value estimate is around $60.
T. Rowe Price Group (TROW ): Maintains 4 STARS (accumulate)
Analyst: Robert McMillan
The brokerage firm posted December quarter EPS of $0.35 vs. $0.43, above expectations. The results reflect a 6% drop in assets under management, which fell to $156.3 billion on equity market decline. The company is optimistic that an economic rebound, benign interest rate and inflation environment, plus international expansion and such new opportunities as section-529 college savings plans, will help 2002 business prospects. S&P is reviewing its estimates. Shares still are attractive given the company's solid profitability, broad asset-class diversification and long term growth prospects.