S&P Says Buy PepsiCo

PepsiCo (PEP ): Reiterates 5 STARS (buy)

Analyst: Richard Joy

The soft drink manufacturer continues to sees 5% to 6% increase in volume, 6% to 7% in revenue, 11% to 12% in operating profit, and 13% to 4% in EPS. Businesses performed well in January and February. S&P expects new products to continue the momentum for the rest of 2002. Earnings should be further supported by $175 million in merger synergies. S&P is keeping its 2002 and 2003 EPS estimates, respectively, at $1.96 and $2.21. Shares remain attractive, given Pepsi's strong brand momentum, industry-leading growth potential and earnings visibility.

Williams Cos. (WMB ): Maintains 3 STARS (hold)

Analyst: James Kartsonas

The company lowered its guidance, citing the impact of financial reforms. Williams now sees 2002 EPS ranging from $2.15 to $2.30, with 15% EPS growth thereafter. Total debt to capitalization now stands at 71%, and Williams plans to bring that to 57% by yearend.. The company also intends to have about $2.3 billion in capital expenditures in 2002, including some $900 million in maintenance. The company sold its Kern River pipeline system, and plans to sell its Midwest petroleum product pipeline and other assets, for total proceeds of $250-$750 million, which should help Williams maintain its critical investment grade rating.

URS Corp. (URS ): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Stewart Scharf

January quarter EPS was $0.52 after a $0.09 gain due to new accounting principles, vs. a year-ago's $0.42 -- a bit above consensus. Revenues rose 5.3%, and new government orders are strong. S&P expects private sector work to increase as the economy rebounds. The leverage ratio of three still is high, but URS is cutting its debt. S&P sees mass transit and airport projects, as well as security-related work, aiding the backlog. Despite only 7% projected EPS growth for fiscal 2003 (Oct.), with new bookings benefiting fiscal 2004 and beyond, and shares at 11 times S&P's fiscal 2002 (Oct.) EPS estimate of $2.80 (after a $0.36 goodwill accounting gain), URS is attractive.

Intuit (INTU ): Reiterates 5 STARS (buy)

Analyst: Scott Kessler

The software company traded down Thursday on a confluence on perceived unfavorable news from the entire week. Market research company NPDTechworld reportedly said TurboTax sales growth slowed a bit of late. Competitor H&R Block announced an alliance with one-time Intuit ally AOL on Wednesday. The Wall Street Journal also recommended TaxCut over TurboTax on Thursday. S&P's work suggests TurboTax is selling well, and not is succumbing to H&R Block's discounting. The recent Intuit deal with Yahoo! made AOL's alliance expendable. S&P recommends investors buy on weakness, as the company is attractive with a forward price-earnings-to-growth multiple of 1.2.

Manpower (MAN ) Robert Half (RHI ): Upgrades to 4 STARS (accumulate) from 2 STARS (avoid)

Analyst: Todd Rosenbluth

Nonfarm payrolls rose 66,000, higher than expected. S&P is encouraged by job gains in retail services, and more modest losses in manufacturing. Temporary hires rose up from January. S&P sees the unemployment rate peak near 6.0% in June, down from the previous estimate of 6.2%. With students graduating, S&P sees a further pickup in temporary hiring trends. Earnings growth still is restricted until 2003. Despite price-to-earnkings on the high side, with second straight positive employment results and an economic rebound, shares should rally.

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