A Sweeter Smell for Georgia Gulf?

Georgia Gulf (GGC ): Upgrades to 2 STARS (avoid) from 1 STARS (sell)

Analyst: Richard O'Reilly

The chemical maker sees a Q1 loss per share of $0.20-$0.24, slightly better than the Street's $0.28 loss estimate. This compares with Q4's $0.24 loss, and a year-ago EPS of $1.00. Sequentially vs. Q4, Georgia Gulf sees much higher caustic soda prices and increased PVC volumes, offsetting higher energy costs and lower prices for resins. The aromatics segment turned back into red on disappointing lower volumes and higher energy costs. Assuming some seasonal recovery in PVC, S&P is cutting its 2001 estimate to $0.50 from $1.00, vs. 2000's $2.03 estimate. With a poor EPS outlook, S&P sees the stock underperforming.

Procter & Gamble (PG ): Maintains 3 STARS (hold)

Analyst: Howard Choe

P&G plans to cut its workforce by 9%, or 9,600 global jobs. The consumer-products maker still has 7,800 job cuts left from its 1999 "Organization 2005" restructuring program. The reduction is necessary to support a slower-growing revenue base and cost-cutting initiatives. P&G indicated that it would shed one non-core business, which S&P believes to be food and beverage, by the end of this June. S&P views the company's initiatives as positive, but enthusiasm is tempered by the lack of a meaningful strategy to boost the top line. S&P is maintaining its fiscal 2001 and fiscal 2002 EPS estimates at $3.11 and $3.39.

Cognex (CGNX ), Keane (KEA ), Neuberger Berman (NEU ) and Sapient (SAPE ): Upgrades to 3 STARS (hold) from 2 STARS (avoid)

Analyst: Mark Basham

After recent further declines, S&P believes the share prices of these four stocks largely reflect diminished expectations. S&P thinks sellers are largely washed out. Although any of these four may decline further amid the market's struggle to find a bottom, S&P thinks percentage declines from this point will mirror the market, and sees these stocks as market performers.

Broadcom Corp. (BRCM ): Maintains 3 STARS (hold)

Analyst: Thomas Smith

After completing a review with outside auditors of warrant-related transactions, the broadband chipmaker is adopting new accounting methodology. The results for Q3 2000 will be restated, and full-year 2000 results will follow a new accounting treatment in form 10-K. The new method removed some goodwill expense and resulted in minor increases in reported earnings: GAAP basis 2000 loss per share improved by $0.02, and pro-forma EPS improved by $0.01. S&P thinks the resolution of this accounting controversy will help the company refocus on its chip business.

Siebel Systems (SEBL ) and RSA Security (RSAS ): Downgrades to 3 STARS (hold) from 4 STARS (accumulate).

Analyst: James Rudy

S&P is lowering its 2001 EPS estimates for Siebel to $0.64 from $0.78, and is lowering RSA's estimates to $1.16 from $1.22. The cuts reflect a broad economic slowdown and the impact of delayed IT decision making. With Siebel at 44 times our 2001 estimate and RSA at 33 times, S&P believes shares are vulnerable to near-term earnings disappointment. However, long-term, both companies continue to be well managed and are in very attractive sectors of the software industry. /J.Rudy

Charles Schwab (SCH ): Reiterates 3 STARS (hold)

Analyst: Michael Schneider

Schwab announced plans to reduce its workforce 11%-13% as declining securities markets and reduced customer trading volumes have hurt results. Schwab sees Q1 operating EPS of $0.08, vs. last year's $0.23 and the current Street consensus of $0.11. The discount brokerage firm also set a buyback of up to 20 million shares. The company has 1.4 billion shares outstanding. S&P is lowering its Q1 EPS estimate to $0.08, and is putting the full-year estimate under review. Current market conditions are bleak, but industry leader Schwab is well positioned to benefit when the market turns.