business

S&P Says Buy JLG Industries

Also: analysts' opinions on American Greeting and Kansas City Southern

JLG Industries (JLG ): Maintains 5 STARS (buy)

Analyst: James Sanders

JLG reported results for fiscal 2002 (July) of $0.40 per share (excluding one-time items), versus $0.80, in line with S&P's estimate. Despite depressed manufacturing conditions, management's focus on expense and debt reduction has primed the company to take advantage of the eventual cyclical upturn in the rental equipment industry.

In addition, S&P's valuation metric, which incorporates a seven-year historical earnings per share average of $0.98 and long-term U.S. bond rates of 4%-5%, indicates that shares are trading at a 40%-50% discount to fair value.

American Greetings (AM ): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: William Donald

With American Greetings still trading at less than one times the low-teens earnings per share growth rate that S&P projects for the next few years, S&P believes the shares, which have advanced 27% year to date, will continue to outperform in the months ahead.

Results are benefiting from firmer pricing and modest sales gains, plus restructuring efforts. American Greetings appears on track to earn about $1.57 earnings per share for fiscal 2003 (Feb.) and S&P sees $1.80 earnings per share for fiscal 2004. S&P says shares are attractive, and are trading at less than 11 times the fiscal 2003 estimate. The cost options expensing in fiscal 2002 was relatively low at $0.13.

Kansas City Southern (KSU ): Maintains 3 STARS (hold)

Analyst: James Corridore

The company says the rail company's third-quarter earnings per share will be below expectations due to higher operating costs caused by congestion related to the implementation of a new computer operating system. In addition, Kansas City Southern is seeing some diversion of traffic due the congestion. The new operating system is expected to improve efficiencies and lower costs, but is doing the opposite in the short term. The company is vague about the total impact on third-quarter results.

S&P is cutting the 2002 earnings per share estimate to $0.65, from $0.75. At 21 times that estimate, well above the peer average, S&P would not add to positions.

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