Still Hold Enron
Enron (ENE ): Still 3 STARS (hold)
Analyst: John Kartsonas
Enron announced the closing of remaining $450M of $1B secure credit lines. In addition, Enron renegotiated $690M note payable obligation, now due mid-December. Enron says it will continue discussions on restructuring debt obligations to enhance its liquidity position. S&P believes the stock performance will continue to be driven by events and emotions. However, with shares trading at discount to stock-swap price ratio, S&P believes investors will get compensated for holding Enron's stock.
Microsoft (MSFT ): Still 4 STARS (accumulate)
Analyst: Jonathan Rudy
The world's largest software company has reached a settlement agreement that would resolve over 100 class action law suits alleging the company overcharged PC consumers for its products. Under the proposed settlement, Microsoft will provide more than $1 billion over five-year period to put software and computers into 12,500 public schools serving nearly 7 million students. The deal will result in a $375 million after-tax charge, a $0.06 to $0.07 per share reduction in December quarter earnings. Nine states are still pursuing tougher sanctions. Based on S&P's discounted cash flow model, the fair value for Microsoft is $70 to $75, Rudy says.
Wellpoint (WLP ): Still 4 STARS (accumulate)
Analyst: Phillip Seligman
The managed care provider is to acquire Carefirst BlueCross BlueShield for $450 million in cash and $850 million in stock. It's the second large acquisition notice in 2 months. The deal is contingent on conversion of Carefirst to for-profit status. The deal will strengthen WLP's presence in mid-Atlantic region and provides revenue and cost synergies of $30 million, Seligman says. It is slated to close in 18 months. Seligman says he still sees 2001 earnings per share of $6.21 and 2002 of $7.15. WLP sees deal adding $0.10 to 15% EPS growth expected in 2003. RightCHOICE merger won't be disrupted, Seligman says. He adds that WLP will be attractive at 17 times 2002 estimate versus 15%-plus long term growth.