Still Hold Yahoo!
Yahoo! (YHOO ): Maintains 3 STARS (hold)
Analyst: Scott Kessler
Yahoo! posted Q2 EPS (pro forma) of $0.01 vs. $0.11, slightly over estimates. Revenues declined 33% from a year ago, but were up 1% from Q1 and over 10% above S&P's estimate on solid growth in users and usage. The corporate services segment showed more than a 9% revenue rise from Q1, with new customer wins such as Cap Gemini E&Y and Hewlett-Packard. Restructure steps showed savings faster than expected, notably in sales and marketing. S&P is upping the 2001 revenue forecast by $25 million to $730 million and raising the EPS estimate by $0.02 to $0.07. S&P sees 2002 EPS at $0.18. At 107 times S&P's 2002 estimate, and amid a weak ad market, S&P would hold Yahoo! shares.
Microsoft (MSFT ): Reiterates 3 STARS (hold)
Analyst: Jonathan Rudy
Microsoft says June-quarter revenues will be $6.5-$6.6 billion, compared with S&P's estimate of $6.45 billion. The software concern expects operating results to be in line. S&P anticipates operating EPS of $0.43 when Microsoft reports results next week. The company also will take a $3.9 billion pretax non-cash charge related to investments in the cable and telecom industries. S&P is keeping the fiscal 2002 (June) operating EPS estimate at $1.90. At 37 times that estimate now, S&P would not add to positions.
Motorola (MOT ): Maintains 2 STARS (avoid)
Analyst: Ari Bensinger
The wireless phone giant posted a loss per share of $0.11 vs. a year-ago's $0.25 EPS, a penny better than the Street's mean. Sales are down 19% on continued weak demand in the handset division (33% of Q2 sales) and semiconductor division (17%). Motorola expects weak demand in both sectors to continue through the second half. S&P says it's very impressed with the extent of cost reduction measures. The company has reduced receivables, inventories and its short-term debt. Cash flow from operations is strong at about $1 billion. Motorola also is beginning to improve its performance in the handset segment with more simplified products.
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