CS First Boston Lowers Shaw to 'Neutral'

Analyst John McGinty says Shaw is likely to tread water until it overcomes certain issues

CS First Boston downgraded Shaw (SGR ) to neutral from outperform.

Analyst John McGinty says Shaw is likely to tread water until it overcomes certain issues. It notes Shaw, in third-quarter financial results, cut the $1.32-$1.37 fiscal 2003 (Aug) earnings per share guidance to $1.25-$1.27, and trimmed the $1.45-$1.65 fiscal 2004 guidance to $1.15-$1.25. McGinty says instead of breakeven free-cash flow in the second-half of fiscal 2003, Shaw expects to use about $70 million to $75 million. McGinty notes net debt to capital now stands at 29%; in order to eliminate Liquid Yield Option notes, Shaw needs roughly $350 million in cash -- up from the current $260 million level. He cut the $1.35 fiscal 2003 earnings per share estimate to $1.25, and cut the $1.50 fiscal 2004 estimate to $1.00. He also cut the price target to $10.

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