AOL Time Warner: Still a Hold

The media superpower is worried about a slowing U.S. economy. Also, opinions on and Halliburton

AOL Time Warner (AOL ): Maintain 3 STARS (hold)

Analyst: Scott Kessler

The media powerhouse posted pro forma combined December quarter cash EPS of $0.14 vs. $0.48. The AOL segment posted EPS of $0.15 vs. $0.09. The company's pro forma revenues rose 8.2%, on strength in the AOL and cable divisions. AOL's revenues were up 27%, with advertising and commerce up 65% on gains from new clients such as Sears (S ), Federated (FD ), and Charles Schwab (SCH ). AOL usage and operating margins have improved nicely. The combined company's EBITDA rose 14% and its cash EPS rose 17%, slightly below forecast. AOL also announced cross-platform marketing deals with Nortel Networks (NT ), PurchasePro (PPRO ) and Cendant (CD ), underscoring clout with advertisers. The company remain concerned about the slowing economy. ): Maintain 3 STARS (hold)

Analyst: Scott Kessler

The online retailer posted a pro forma Q4 loss of $0.25 vs. $0.55, better than expectations. Revenue rose 44%, above $960 million guidance, on strong international sales in its electronics, kitchen and hardware stores. Amazon's operating margins climbed nicely on higher leverage and efficiencies. With lower consumer activity, we see 2001 revenues of $3.5 billion, down from $4 billion the company saw a few months ago. But, sees Q4 pro forma operating profits. The retailer says it plans to lay off 1,300 employees (15%) and is closing a Georgia distribution center and a Seattle customer service facility to ensure profits. Despite the major challenges facing the company, the shares are still worth holding, since is trading at less than two times estimated 2001 sales, and has $1.1 billion in cash and equivalents on its balance sheet.

Halliburton (HAL ): Upgrade to 3 STARS (hold) from 2 STAR (avoid)

Analyst: Tina Vital

The oil-services giant posted Q4 EPS $0.28 (excludes $0.27 engineering and construction (E&C) charges) vs. $0.17 (excludes $0.36 gain), $0.02 above the Street's consensus, on 1.8% fewer shares. Higher oil and gas prices, as well as increased international activity moved its energy services group income up 107%, but E&C saw a $99 million loss (vs. $40 million rise). Halliburton expects to complete its E&C restructure by Q2 2001, and plans to sell its Dresser unit soon. Halliburton sees 2001 EPS at $1.41, and 2002 EPS at $2.00. The shares are trading at a discount to the company's peers, at 28 times our 2001 EPS estimate, but the E&C group is limiting its growth.

Philip Morris (MO ): Maintains 5 STARS (buy)

Analyst: Richard Joy

The tobacco and food manufacturer posted Q4 EPS before special items of $0.87 vs. $0.70, a penny below expectations. The company's full-year EPS was $3.71 vs. $3.30. Philip Morris's Q4 profits rose 5.8%, but would have gained 11.9% excluding currency. U.S. tobacco profits gained 5%, while international tobacco profits rose 4.5%. U.S. cigarette retail-market share increased to 50.3%. U.S. food profits added 8.5%, aided by strong volume gains. International food sales jumped 16%, but beer profits fell 31%. Financial services rose 15%. Philip Morris' strong operating results, improving litigation environment and the company's planned IPO of Kraft make the shares attractive at 11 times the $4.12 EPS we see for 2001. (CLKS ): Drops coverage

Analyst: Mark Basham

With low-priced shares now trading under $5, S&P is dropping its STARS system coverage of the educational software firm.

Merideth Corp. (MDP ): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: William Donald

The magazine publisher posted fiscal 2002 EPS of $0.47 vs. $0.48, in line with estimates. The slowing advertising market, and higher paper and postage costs hurt Meridith's revenues and profits. Merideth's publishing operating profit fell 10.3%, while broadcasting profit declined 1.4%. The company says fiscal Q3 is off to a slow start, with publishing and broadcasting revenues down so far. Assuming these trends continue, the company sees a 5%-10% decline in fiscal 2001 (June) EPS from fiscal 2000's $1.71. We are cutting $0.15 from our fiscal 2001 EPS estimate to $1.60, and cutting $0.13 from fiscal 2002's EPS estimate to $1.82.

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