Still Hold ImClone
ImClone Systems (IMCL ) Continue 3 STARS (hold)
Analyst: Frank DiLorenzo
The company is in talks with the FDA on an approach to consider reviewing Erbitux for approval to treat colorectal cancer with new data compiled from U.S. Phase II study and new data provided from European trial. Speculatively, S&P feels approval possible in 2003. But S&P thinks the market potential of Erbitux is diminished with possibility AstraZeneca's Iressa will be first to market. OSI Pharmaceuticals is in Phase III with Tarceva, and Abgenix and Immunex in Phase II on ABX-EGF.. On S&P's 2004 EPS estimatre of $0.76 (assumes a bullish $273 million of U.S. Erbitux sales), ImClone is fully priced.
Campbell Soup (CPB ) Downgrade to 1 STAR (sell) from 3 STARS (hold)
Analyst: Richard Joy
Sales trends remain sluggish despite increased marketing investment. FY 03 (July) will likely remain challenging as the company works to stabilize its condensed soup business. Sales and earnings visibility remain low. S&P is keeping its FY 02 EPS estimate at $1.29, but reducing its FY 03 estimate by $0.05, to $1.35. S&P believes Campbell is two to three years away from being able to consistently deliver its 8% EPS growth target. At 21x S&P's FY 02 EPS estimate, a premium to comparable peers with better growth prospects, the shares should underperform the market.
Clear Channel Communications (CCU ) Continue 4 STARS (accumulate)
Analyst: Howard Choe
The company posted Q4 loss $0.61 vs. $0.33 loss, $0.11 and $0.23, lower than S&P and mean street estimates. The disparity follows $80 million in one-time expenses related to reorganizing its staff. Additionally, revenue decline was less than expected due to stronger radio segment. Like its peers, Clear Channel sees Q1 radio revenues up 1%-3%.
Barring reorganization expenses, Q4 EBITDA is in line. S&P sees 2002 revenue and EBITDA up 3% and 5%. With leaner staff and a formidable market position, CCU is well positioned for recovery, S&P argues. And at 18 times enterprise value/EBITDA, Clear Channel is trading at a discount to its peers.
Gap (GPS ): Still 2 STARS (avoid)
Analyst: Maureen Carini
Gap reported a Q4 loss of $0.04 vs. EPS of $0.31, in line with street estimates. Total sales fell 11% on a 16% drop in same-store sales. Margins continued to be hurt by lower volume and heavy discounting. S&P, however, is encouraged by strides the retailer has made in reducing inventory levels and controlling expenses. S&P believes the company's ultimate success depends on customer acceptance of new merchandise.
But with same-store sales for February below expectations, S&P is still not convinced Gap has found right product mix. S&P cut its fiscal year 2003 EPS estimate by $0.15 to $0.35. S&P adds the shares are vulnerable to further earnings disappointments.
Pier 1 (PIR ): Still 4 STARS (accumulate)
Analyst: Maureen Carini
In response to better-than-expected same-store sales growth of at least 10% for February, the retailer has revised its Q4 EPS guidance upward. The company now sees $0.48 to $0.49 versus the street's expectations of $0.45. It continues to see strong momentum in both existing and new stores. Meanwhile, customer traffic, transactions per customer and average transaction value all are higher.
S&P raised its fiscal year 2002 (February) EPS estimate by $0.05 to $1.01, and sees $1.18 for fiscal year 2003. At 16 times fiscal year 2002 EPS estimates, stock remains an attractive portfolio addition.