Still Avoid Krispy Kreme

Krispy Kreme Doughnuts (KKD ): Maintains 2 STARS (avoid)

Analyst: Dennis Milton

The company posted first quarter earnings per share of $0.15 vs. $0.10, in line with S&P's estimate -- a penny above consensus. Systemwide sales are up 30.4%, with a 12.9% rise in same-store sales. The company-owned same-store sales rose 10.5%. Krispy Kreme is expecting 10% growth for the balance of fiscal 2003 (Jan.) Operating margin widened to 13.1%, from year-ago's 9.8%, helped by rapid growth of franchise operations. The company is targeting 15% operating margin for fiscal 2003 and sees fiscal 2003 EPS of $0.63. With shares trading at about 64 times S&P's fiscal 2003 estimate of $0.64 and 45 times the fiscal 2004 $0.90 estimate, Krispy Kreme is still expensive.

Barnes & Noble (BKS ): Maintains 5 STARS (buy)

Analyst: William Donald

The company posted a $0.02 Q1 loss before a charge, vs. a year-ago's $0.12 loss. The Street expected a $0.05 loss. Every segment performed better than the company had expected, and B&N raised its fiscal 2003 (Jan.) guidance by $0.03, to $1.90 -- up 48% from fiscal 2002's $1.28. S&P estimates $1.95, including a 15% increase in retail profits to $1.82. The company says its share of GameStop profits will jump to $0.36 from $0.11. Also, B&N sees a drop in online and other equity losses to $0.24 from $0.41. Shares are trading below S&P's $40 12-month target.

Cuno (CUNO ): Maintains 4 STARS (accumulate)

Analyst: Stewart Scharf

The company posted April quarter earnings per share of $0.32 after a $0.02 goodwill benefit, vs. a year-ago's $0.27, in line with estimates. Sales rose 4.8%, or 7% in local currencies. Strong potable water and healthcare sales offset weak fluid processing volume. S&P expects new products, a shift in revenue mix to healthcare, and the improving economy to aid results. Despite pension plan funding, S&P projects strong fiscal 2003 (Oct.) free cash flow of $10 million and a low debt-to-capital ratio. With shares trading at 23 times the $1.50 EPS that S&P sees for fiscal 2003, on par with peers, and consistent return on equity above 15%, plus positive prospects, S&P sees room for a rise.

Medtronic (MDT ): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Robert Gold

The company met its fiscal 2002 (May) fourth-quarter earnings per share target of $0.34 vs. $0.30, before litigation costs of $0.09. Medtronic saw market share gains in cardiac rhythm management, diabetes, and spinal areas. Coronary stents were better than expected in the U.S, though S&P says the overall market is a bit soft. Results were boosted by the inclusion of MiniMed, and revenues rose 18% after a 2% foreigh exchange hit. Given momentum in ICDs, peripheral stents, diabetes and spinal areas, S&P sees fiscal 2003 top-line growth of 17% and a similar earnings per share gain, to $1.42. S&P also sees fiscal 2004 EPS around $1.65. With more reasonable multiples of 32 times the fiscal 2003 EPS, and 7.4 times sales, S&P says accumulate

Juniper Networks (JNPR ): Maintains 3 STARS (hold)

Analyst: Megan Graham Hackett

The company held an analyst meeting Wednesday, but, as expected, didn't update financial guidance. The company focused on its Unisphere acquisition, which adds complementary business and greater international distribution. S&P expects Unisphere to reach break-even by yearend. The company also highlighted recent efforts to streamline its IT systems to make it more efficient and more responsive to customers and changing industry dynamics. The company has made progress in increasing customer diversity, and now has 500 customers. S&P is keeping the 2002 earnings per share estimate at $0.05. At a price to sales ratio of four, in line with peers, S&P says hold.

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