Still Buy UnitedHealth
UnitedHealth (UNH ): Reiterates 5 STARS (buy)
Analyst: Phillip Seligman
The company plans to purchase AmeriChoice for $560 million, comprising 5.5 million UnitedHealth shares and assumption of $30 million in debt. AmeriChoice, with estimated 2002 revenues of $900 million, is a privately-held managed care organization serving 360,000 Medicaid and Medicare beneficiaries in New Jersey, three New York City boroughs, and Philadelphia and surrounding counties. The deal, which will expand UnitedHealth's Medicaid service business, is expected to close in the fourth quarter of 2002 and be immediately accretive to EPS by over $0.05 on an annualized basis.
Smucker (J.M.) (SJM ): Keeping 5 STARS (buy)
Analyst: Mark Basham
The company updated its guidance following completion of the Jif/Crisco acquisition and the release of fiscal 2002 (ended April) results. The biggest change is for Crisco, where there is some question about Procter & Gamble's support of the brand before its sale. Smucker suggests that retail stocks may be low, but conservatively reduces guidance to lower near-term Crisco outlook. We at S&P are trimming our $1.95 fiscal 2003 EPS estimate to $1.93. With the farm bill likely to aid margins in peanut butter, we are raising our fiscal 2004 estimate from $2.15 to $2.19. We are maintaining our intrinsic value target for the stock of $42-$44.
ESS Technologies (ESST ): Still 4 STARS (accumulate)
Analyst: Megan Graham-Hackett
The company preannounced upside to its prior Q2 guidance. ESS sees revenues of more than $84 million, compared with its prior guidance of $76-$79 million, and EPS above $0.34, compared with the Wall Street mean EPS estimate of $0.28. ESS cited stronger-than-expected demand for its video products, especially gains in its DVD market share. ESS's DVD chip shipments exceeded 2 million units in April and again in May. We at S&P are raising our 2002 estimate by $0.13 to $1.39. The shares, trading at a p-e of 13, are attractive vs. the company's peers and the broader market.