General Motors (GM ): Upgraded to 3 STARS (hold) from 2 STARS (avoid)
Analyst: Efraim Levy
Better retail sales than expected led GM to raise earnings outlook, excluding Hughes Electronics and any European restructuring charge. With higher production planned for North America, GM now predicts Q1 EPS of $1.20, vs. $0.85 S&P current forecast. The automaker is also raising full 2001 guidance by $0.50, to $3.50. Analyst Efraim Levy says S&P was looking for $2.60, while the Wall Street mean estimate was $2.94. In addition, the company will offer $2.5 billion of convertible debt to enhance financial flexibility. The earnings news is positive, Levy notes, but the industry environment remains competitive.
Citrix Systems (CTXS ): Repeat 5 STARS (buy)
Analyst: Scott Kessler
Despite the software and services company's recent price weakness, analyst Scott Kessler believes its long term story is intact. Kessler says he was encouraged by what he heard in a Feb. 22 conference call with Citrix management. The first quarter is on track, with results to benefit from a solution-based selling focused on remote connectivity, workforce mobility, application deployment and business continuity.
Citrix is actively pursuing federal government market, Kessler says. The South Beach portal product has 400 resellers with the launch set for June 2. Kessler adds that the relationship with Microsoft has never been stronger. He sees the early March users conference/analyst meeting as positive catalysts.
Lowes Co. (LOW ): Still 4 STARS (accumulate)
Analyst: Maureen Carini
The home improvement retailer posted better than expected fourth quarter earnings per share of $0.28 vs. $0.18. The same-store sales were up 7.4%, versus expectations of a 3%-5% gain. The company saw solid gains across all geographic regions and in most product categories. The margins benefited from better mix, improved sourcing, better management of shrink and well-controlled operating expenses.
Carini sees fiscal year 2003 (Jan.) earnings per share of $1.55, driven by the addition of 123 new stores, mostly in major metro markets, by 4%-6% higher same-store sales and by modest margin improvement.
Qualcomm (QCOM ): Still 5 STARS (buy)
Analyst: Ari Bensinger
Communications systems company Qualcomm reaffirmed its second quarter earnings guidance of $0.20 a share. MSM phone chipset volumes are tracking at the high end of previous 13-14 mln. unit estimate. And high-margin CDMA 1X chipsets are expected to be 1 million higher than originally forecast.
Analyst Ari Bensinger says the data indicate solid momentum in build out of next generation networks. With its CDMA technology used for both W-CDMA and CDMA2000 3G standards, Qualcomm is best positioned to benefit from inevitable transition to broadband wireless networks. With price to earnings ration 1.3 times long-term growth rate, based on Bensinger's $0.93 a share firscal year 2002 (September) estimate, the company is trading below its peers. Bensinger calls it attractive.
H&R Block (HRB ): Still 5 STARS (buy)
Analyst: Todd Ronsenbluth
Tax services company H&R Block on Friday launched free tax filing for teenagers below 18 years old through its online program. Though the new program generates no direct revenues, the marketing effort may have indirect benefit from parents subsequently filing with HRB, analyst Todd Rosenbluth says. The program is geared to steal share from Turbo tax competitor, he says.
Rosenbluth sees fiscal year 2002 (April) earnings per share of $2.25 and fiscal year 2003 at $2.47 a share. He expects strong January quarter earnings per share of $0.09 on Feb. 27 after the close. With the favorable tax preparation environment amid confusing legal changes, and solid mortgage business, HRB is appealing at 2.2 times our fiscal year 2003 sales estimate of $3.9 billion and 20 times fiscal year 2003 earnings per share projection.