BJ Services: More Upside Likely

BJ Services (BJS ): Reiterate 5 STARS (buy)

Analyst: Tina Vital

Shares up 7.5% Tuesday on announcement company expects FY (Sept.) Q1 EPS of $0.74 to $0.76, exceeding current street estimates by $0.13 to $0.15. Revenues should be up 38%. reflecting 53% higher U.S./Mexico pressure pumping sales, 29% higher international sales. Operating margins widening. Raising FY 01 EPS by $0.92 to $3.53, set FY 02 at $3.98. Over multi-year upturn expect peak earnings of $6, share price of $90. With more upside surprises likely, and shares trading at 20X our FY 01 EPS, at discount to peers, buy.

IT Group (ITX ): Reiterate 3 STARS (hold)

Analyst: Stewart Scharf

Despite second EPS warning since October. Co. revises its forecasts to reflect funding and project delays, lower margins in commercial business. Implementing strategy to resolve project claims and monetize non-core assets. Will result in $30-35 mln. for debt paydown over 12 months, Q4 '00 $17-$18 mln. non-cash charge. Backlog still strong at $4.8 bil. Debt likely to fall nearly 15% to $565 mln. by '01 end. Cutting our '00 EPS est. by $0.19, to $0.61, '01's by $0.27, to $.88.. With stock off lows but still 70% below mid-'99 level, suggest maintain positions.

FleetBoston Financial (FBF ): Reiterate 5 Stars (buy)

Analyst: Stephen Biggar

Co. confirms it sold over $1 billion of nonperforming loans, notes that it is comfortable with Q4 consensus EPS estimates. We do not see sale as indication of worsening conditions, but rather as preemptive move to lighten distressed lending portfolio in view of slowing economy. Move likely to be followed by other banks as industry strives to minimize impact of slowdown on credit quality. FBF well positioned in target markets. like current revenue mix that will maintain EPS momentum in current economic environment.

Suntrust Banks (STI ): Reiterate 4 STARS (accumulate)

Analyst: Stephen Bigger

Posts Q4 EPS of $1.12 vs. $1.06, in line. Favorable service territory still posting high single-digit loan growth, with margin pressure witnessed throughout '00 now easing. Weaker credit quality is function of industry/economic conditions, but credit ratios indicate co. well prepared to handle modest deterioration. Recent efficiency improvement efforts having favorable impact, aided by wind-down of Crestar merger integration. At 13 times our '01 EPS estimate of $4.85, expect shares to outperform.

Darden Restaurants (DRI ): Downgrade to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Karen Sack

December same-store sales hurt by bad weather throughout much of country, rose just 2%-3% at Red Lobster and Olive Garden chains, including 2%-3% rise in menu prices. DRI sees slowed economy holding gain in same-store sales to more normal levels of 3% to 5% for FY 01 (May), following strong 8%-9% gains for FY 00. Lowering our FY 01 (May) EPS estimate by $0.05, to $1.55, FY 02 by $0.05, to $1.80. Still think co.'s basic business is solid as casual dining sector gains market share over fast-food restaurants.

Genzyme (GENZ ): Reiterate 4 STARS (accumulate)

Analyst: Frank DiLorenzo

Announces Q4 revenue of $203 million, $2 million above our estimate. Renagel sales for 2000 were $56 million, well ahead of our $49 million view. still feel Renagel is primary growth driver that investors will focus on for '01. Co. also says it expects revenues to total more than $900 million in '01. we were expecting $899 million. GENZ is working on meeting FDA request for added data on investigational enzyme replacement therapy Fabrazyme. to release full financial results March 8. GENZ attractive on relative valuation basis.

Ceridian Corp. (CEN ): Downgrade to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Jonathan Rudy

Co. announces revenue and Earnings shortfall. Expects '01 pro-forma revenue to be up 6% and EPS at $0.65-$0.70, both below estimates. We are concerned about sales transition issues in co.'s core Human Resources division, which should post low-single digit revenue growth. Also, co. will be hurt by impact of lower short-term interest rates on profits derived from CEN's tax filing float balance. Placing our '01 EPS estimate under review for downward revision. With continued challenges near-term, would not add to positions.

Quanta Services (PWR ): Downgrade to 4 STARS (accumulate) from 5 STARS (buy)

Analyst: Mark Basham

Decelerating economic growth increasing uncertainty regarding outlook for 2001 capital spending in communications sector. Based on uncertain, but clear weakening trend in outlook, S&P thinks this puts PWR's 15%-20% internal revenue growth target for 2001 that co. issued on 12/19/00 in greater doubt. With PWR's increased use of financial leverage, also more difficult to justify higher relative valuation to peer group or to the "500". Putting 25% EPS growth projection for 2001 under review.

Greenpoint Financial (GPT ): Upgrade to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: E.Eisenstein

Raising '01 EPS estimate TO $3.25 FROM $3.13. Pleasantly surprised by company's expectation of Q4 EPS at $0.80-$0.84, well above Street consensus, and by its report of strength in core mortgage and consumer businesses. With announced charges of $0.61, mostly pertaining to retained interests in Manufactured Housing Securitizations, we think bad news is mostly behind that troubled segment. Trading at 1.6X book value, below peers, we see potential for P/E expansion going forward.

CoStar Group (CSGP ): Downgrade to 2 STARS (avoid) from 3 STARS (hold)

Analyst: Mark Basham

S&P thinks slowing economy puts at risk CSGP's goal of reaching pro forma profitability before end of 2001. Cutting our '01 revenue growth rate forecast from 35% to 30%. Raising our '01 pro forma loss per share estimate from -$0.72 to -$0.80, lowering '02 EPS estimate from $0.60 to $0.45. CSGP has held up rather well amid dot-com slaughter, with share price up slightly in past nine months. But given growing macro risks, would avoid shares for now.

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