Still Avoid Qwest
Qwest Communications (Q ): Reiterates 2 STARS (avoid)
Analyst: Todd Rosenbluth
The shares are down sharply today, following notification late yesterday that troubled carrier is being probed by the US Attorney's office. The subject of the probe has not been disclosed, but the scrutiny is independent of SEC and Justice Dept. investigations already in progress on Qwest's accounting practices. While we still see benefits from potential asset sales of fiber networking, Qwest's shares are unattractive, given a mammoth $26B debt load, a declining revenue stream, and an expanding list of investigators.
Duke Energy (DUK ): Reiterates 4 STARS (accumulate)
Analyst: Justin McCann
We see today's drop in the share price as a good opportunity to add to one's position. The stock is down about 8% following a downgrade and sharp reduction in earnings estimate by Prudential, which reduced its opinion from buy to hold, and cut its 2002 EPS estimate by $0.29 to $2.37, and its 2003 forecast by $0.32 to $2.68. Despite current weakness in the industry, we do not share this perspective. We are maintaining our EPS estimates of $2.70 for 2002 and $2.95 for 2003. Duke shares are attractive at 10 times our 2002 estimate.
Mohawk Industries (MHK ): Still 5 STARS (buy)
Analyst: Raymond Mathis
Concern about a patent suit by a European company against laminate flooring manufacturers is unduly weighing on Mohawk shares, since loss of the suit would not have a material impact on the company. Mohawk's fundamentals remain strong and we continue to expect a record second quarter. May housing starts rose 11.6% and existing home sales held steady at a 5.75 million annual pace. Consumer confidence slid in June, but those expecting to purchase carpet in the next six months remained at 5.7%. At 13 times our 2002 EPS estimate, the shares offer a compelling buying opportunity.