Still Hold FPL
FPL Group (FPL ): Still 4 STARS (accumulate)
Analyst: Justin McCann
The energy company posted third quarter earnings per share of 1.98, vs. $1.84 a year ago, which was in line with expectations. With more than 2% customer growth and strong demand, earnings per share from the Florida Power & Light utility rose 6.8% to $1.72. FPL's non-regulated independent power unit increased earnings nearly 37% to $0.26, aided by more than 850 megawatts of additional generating capacity.
McCann is maintaining his earnings per share estimates of $4.65 for 2001 and $5.05 for 2002. Over the next several years, he sees consolidated earnings per share growth of approximately 7%, as non-regulated units grow at around a 25% rate. He says shares are attractive at ten times the 2002 earnings per share estimate.
Bristol-Meyers Squibb (BMY ): Still 3 STARS (hold)
Analyst: Herman Saftlas
The pharmaceutical company posted third quarter earnings per share of $0.63, vs. $0.62 a year ago, which was in line with expectations. Sales were up 4% with strength in Glucophage (+44%), Pravachol (+26%), Plavix (+64%) more than offseting generic erosion in Taxol and Buspar. The analyst said the company is moving towards a pure play in drugs with recent divestitures of Zimmer and Clairol, and acquisition of Dupont Pharmaceuticals.
Saftlas says he expects near-term NDA filings for Vanlev antihypertensive and Abilitat anti-psychotic. The company, he says, borrowed $5 billion to fund the acquisition of Dupont and investment in Imclone (oncology drugs). He sees $0.10 per share dilution from those deals in 2002. The company is valued at a 10% discount to big pharma multiple.
American Express (AXP ): Maintains 3 STARS (hold)
Analyst: Robert McMillan
The financial services company posted quarterly results of $0.22 including restructuring and September 11 effects, versus $0.54 in the year ago period, which was below Standard & Poor's estimates. Its results were hurt by a significant drop in consumer and corporate spending after the terrorist attacks, lower discount revenue and lower financial advisory revenue.
McMillan said the restructuring should begin to help earnings in 2002 with $325 million in expected cost savings. He said he believes AXP's business may weaken further in the December quarter on continued lower corporate spending following the terrorist attacks. He is reviewing his estimates and would not add to positions until the business climate improves.
Xerox Corp. (XRX ): Continue 3 STARS (hold)
Analyst: Richard Stice
Xerox posted a third quarter loss per share of $0.24 before charges, versus a loss of $0.30 a year ago, which was in line with lowered guidance. Revenues were down 13% on economic weakness and competitive pressures while gross margin widened 1.2 percentage points on operational improvements and favorable currency translation.
The company retired $12 million of long term debt in the third quarter and continues to be in full compliance with debt covenants. Its cash position is up $200 million since the second quarter. Xerox is cautiously optimistic about a return to operational profitability in the fourth quarter.