S&P Says Buy Varian Medical

Also: Analysts' opinions on PeopleSoft, Invitrogen, and Altria

Varian Medical Systems (PSFT ): Reiterates 5 STARS (buy)

Analyst: Robert Gold

The shares were down about 10% on Apr. 4, which we believe reflects softness across many areas of the healthcare sector that are tied to the capital equipment purchase cycles. Investors may be concerned about the pace of hospital spending amid a more restrictive federal and state budgetary environment. However, we believethe selloff in Varian presents a compelling opportunity, given the company's extensive and visible IMRT order backlog, and rising demand for linear accelerators used in security applications. The company told S&P it saw no specific reason for the Apr. 4 decline.

PeopleSoft (PSFT ): Reiterates 3 STARS (hold)

Analyst: Jonathan Rudy

PeopleSoft preannounced first quarter revenues of $450 million to $455 million, below the consensus of $484 million. The business software maker now expects first quarter earnings per share of 11 cents to 12 cents, below the Street's 14 cents. The notable disappointment in this announcement was a first quarter license revenue expectation of just $80 million to $85 million. The company says that the environment for capital spending was impacted by the war in Iraq and the weakened economy. S&P is lowering its 2003 earnings per share estimate to 58 cents, from 65 cents, and sees 62 cents in 2004. However, with shares at a discount to peers, an enterprise value that is 1.4 times sales, and about $6 per share in net cash and investments, S&P says it's O.K. to hold.

Invitrogen (IVGN ): Reiterates 5 STARS (buy)

Analyst: Mark Basham

Shares are down Friday, which S&P attributes to a significant first quarter miss by Affymetrix. Affymetrix cited weak capital spending in the academic and biotech sectors, but said academic array revenue growth remained strong. This news suggests growth for Invitrogen could slow in the short term. Excluding the anticipated accretive effect of Invitrogen's recent PanVera acquisition, S&P is lowering the 2003 earnings per share estimate to $1.98 from $2.05. However, Invitrogen remains well below the price target based on S&P's discounted cash flow model of $37-$39, revised from the previous $41-$43.

Altria (MO ): Reiterates 3 STARS (hold)

Analyst: Howard Choe

Late Thursday, the Illinois Senate Executive Committee rejected a proposed bill that could have capped the size of the appeal bond for Altria's Philip Morris USA unit. With the avenue of seeking legislative relief stalled, Altria is likely to pursue an appeal of the bond amount or negotiate a lower bond requirement with the plaintiff. While this is a setback for Altria's appeal process, S&P believes a financially viable solution will eventually be reached. With a "lights" case scheduled for October, S&P expects RJR Tobacco Holdings to trade in line with Altria.

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