Electronic Data Shares Worth Compiling

S&P says the computer-services firm reaped from higher sales and lower costs. Also: opinions on Anheuser-Busch and TransAtlantic

Electronic Data Systems(EDS ): Reiterates 4 STARS (accumulate)

Analyst: Jonathan Rudy

The computer-services firm posted Q4 operating EPS of $0.70 vs. $0.61, $0.02 above estimates. Revenues from its base business were up 9%, in line with expectations. However, we anticipate stronger revenue growth in 2001. Q4 contract signings rose a strong 41%, with a total of $32.6 billion signed during full-year 2000. We are maintaining our 2001 EPS estimate at $2.71. EDS' operating margin should continue to improve as the company benefits from previously implemented cost-reduction and productivity plans. With accelerating revenue growth and improving margins, EDS is attractive at 23 times our 2001 EPS estimate.

Anheuser Busch (BUD ): Reiterates 5 STARS (buy)

Analyst: Richard Joy

The brewing company posted Q4 EPS of $0.23 vs. $0.20, meeting expectations, and its full year EPS was $1.69 vs. $1.47. Worldwide volume for Budweiser brands rose 1.0%, while total brands were up 2.0%. Domestic revenue per barrel rose more than 2.6%. The U.S. market share rose 0.9% to 48.4%. Additional price increases currently being implemented. The company's strong fundamentals bolsters our confidence in 12% EPS growth target for 2001, and we are keeping our 2001 EPS estimate at $1.90. Given Anheuser-Busch's market dominance, growing free cash flow, favorable industry fundamentals and its defensive appeal, its shares are attractive at 22 times our 2001 EPS estimate.

TransAtlantic Holdings (TRH ): Reiterates 4 STARS (accumulate)

Analyst: Catherine Seifert

The insurance company posted $1.38 vs. $0.23 Q4 operating EPS, a bit shy of expectations. The company's full year EPS was $5.43 vs. $3.83, two pennies below our estimate. The results reflected an absence of catastrophe losses, which reduced 1999 operating EPS by $1.58. TransAtlantic's full-year 2000 written premium growth of 10.7% was at the low end of our 10%-13% forecast, but the "encouraged" company expects pricing momentum to continue into 2001. At 16.5 times our 2001 operating EPS estimate of $6.00, TransAtlantic shares are attractively valued. We set a $110-$112 6-12 month target price.

Gannett Co. (GCI ): Reiterates 3 STARS (hold)

Analyst: William Donald

The media group posted Q4 EPS of $1.12 vs. $1.01, meeting its target on a 6% revenue rise (pro forma). The company expects a difficult 2001 in absence of the Olympics and political advertising combined with slow advertising demand, particularly ads from big retailers and domestic automakers. With a second-half pickup, we see 2001 advertising revenues gaining only 1%-3%. Gannett expects a 20% hike in average newsprint prices, but sees reduced usage. Savings from recent acquisitions and other savings are likely to help Gannett's profit margins. We are cutting our 2001 EPS estimate $0.10 to $3.85, up 6% from $3.63 for 2000. With shares trading at 17 times our 2001 EPS estimate, Gannett is in line with industry peers and its long term EPS growth rate.

American International Group (AIG ): Reiterates 4 STARS (accumulate)

Analyst: Catherine Seifert

The insurance concern posted $0.65 vs. $0.56 Q4 operating EPS, in line with expectations. AIG's full-year EPS of $2.45 vs. $2.13 matched our estimate. The results reflected 8% higher property-casualty written premiums and continued solid underwriting results, evidenced by a 96.7% combined ratio. AIG's life premiums/fees grew over 20% in 2000; financial services revenues rose 21%; and profits grew 20%. We still see $2.80 operating EPS in 2001. With shares trading at 31 times our 2001 EPS estimate, AIG is richly valued, but with its unmatched global franchise, the multiple on its high visibility shares is sustainable. We set a 6- to 12-month price target of $100.

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