Still Hold Heinz

Also: analysts' opinions on H&R Block and Bristol-Myers

H.J. Heinz (HNZ ): Maintains 3 STARS (hold)

Analyst: Richard Joy

The company posted April quarter earnings per share before special items of $0.62 vs. $0.53, as expected. Full fiscal year (April) is $2.39 vs. $2.55. Heinz is planning to spin off its pet food, tuna, private label soup and baby food businesses, and merge them with Del Monte Foods. S&P views this deal favorably, and sees a much improved growth profile, returns and transparency developing by fiscal 2005. S&P is reducing the fiscal 2003 estimate by $0.20, to $2.60, to account for incremental marketing. Post spin-off, S&P expects a new ficsal 2003 EPS base of $2.00-$2.05. S&P views Heinz as fairly valued at about 19 times the expected post-spinoff fiscal 2003 EPS.

H&R Block (HRB ): Maintains 5 STARS (buy)

Analyst: Michael Jaffe

The company posted April-quarter earnings per share of $2.46 vs. $2.00, which met S&P's high-end forecast. The gains reflected greater tax and mortgage fees, plus good cost controls. In taxes, H&R Block saw a 9% rise in average fees, on a 5% general price hike and higher fees related to more complex returns. S&P still sees $2.70 earnings per share in fiscal 2003 (April). New tax laws still are being phased in, so demand should stay solid for H&R's services. The company also still is focusing on better margins. Share are trading at 17 times the fiscal 2003 estimate, which is in the bottom half of H&R's historical range, and S&P says shares should outperform over the coming year.

Bristol- Myers Squibb (BMY ): Maintains 3 STARS (hold)

Analyst: Herman Saftlas

The Wall Street Journal reported that Bristol-Myers retained Goldman Sachs to explore a merger and other alternatives. Some deal is likely as Bristol-Myers is struggling with generic erosion in major drugs, a relatively dry R&D pipeline, state lawsuits, and a $2 billion investment in embattled Imclone (the former CEO was arrested Wednesday for alleged insider trading). A merger candidate could be a major European drugmaker seeking greater exposure in the U.S. Dilution could be contained through massive cuts in selling, general and administrative and R&D costs, as well as operating synergies. Bristol-Myers is valued at a discount to peers on a price-earnings and price-to-sales basis.

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