Still Hold Sapient
Sapient (SAPE ): Still 3 STARS (hold)
Analyst: Scott Kessler
Kessler says he is encouraged by the information technology's cost-cutting efforts, depsite news of its first quarter restructuring and departure of its chief financial officer. Sapient said it will cut its workforce by some 545, including 415 consulting staffers. The company will take a $50 to $55 million restructuring charge.
The CFO is departing for another company, but the replacement held the position from 1994-99, Kessler said. Kessler believes that the news is slightly negative because sales growth is not expected to rebound as quickly because of lower headcount. The change in the CFO adds uncertainty, he adds. Kessler says he estimates first quarter net case and investments will total about $1.57 per share. Home Depot (HD ): Still 3 STARS (hold)
Analyst: Maureen Carini
The home improvement retailer posted better than expected fourth quarter earnings per share of $0.30 vs. $0.20. Same-store sales grew 5%, aided by more favorable weather. Margins benefited from better sales mix, improved store productivity and focus on cost controls.
Carini remains comfortable with three year annual sales growth of 15% to 18% and earnings per share rise of 18% to 20%. Carini says the company will continue at slower pace of store expansion, adding about 200 new stores a year. She says, however, that she remains optimistic about long-term growth prospects and views the shares as fairly valued at 34 times her $1.50 fiscal year 2003 (Jan.) earnings per share estimate.
EchoStar Communications (DISH ) and Hughes Electronics (GMH ): Still 4 STARS (accumulate)
Analyst: Howard Choe
Analyst Howard Choe cites the fact that the satellite services companies are announcing service to all local U.S. markets for his rating. In conjunction with FCC filing, the companies announced that upon approval of their merger, they would transmit local content in all 210 markets under one pricing plan and also offer more affordable high-speed Internet access. This action is a solid attempt to allay concerns by regulators and consumer advocates that merger would disadvantage rural viewers. Choe says the valuations are attractive at nearly half of cablers on per subscriber basis.
Waste Management (WMI ): Still 3 STARS (hold)
Analyst: Stewart Scharf
The waste services company's fourth quarter earnings per share of $0.25 before a $0.31 a share special gain vs. $0.06 was in line with revised guidance, says analyst Stewart Scharf. Volume was up 0.5% and prices were up 1.3%. The company is focusing on cost controls, as soft markets are seen through 2002.
Scharf says Waste Management projects 1.5% internal growth for 2002. Free cash flow should remain strong at over $1.1 billion, used for debt paydowns, acquistions ($250 million budget) and buybacks. Scharf says EBITDA should exceed 28%. Waste Management recently completed the conversion of 1,500 financial systems. But with timing of the economic rebound uncertain and the stock selling at 15 times 2002 earnings per share estimates of $1.65 (including $0.20 a share goodwill accounting change gain), Scharf rates it a hold.