S&P Says Hold Genentech

Also: analysts' opinions on Supervalu and Yahoo

Genentech (DNA ): Maintains 3 STARS (hold)

Analyst: Frank DiLorenzo

Second-quarter Rituxan sales of $363.4 million were 13 million above S&P's estimate. U.S. Herceptin sales of $99 million were in line. Other product sales of $171.8 million were $1.5 million above S&P's estimate. Proforma earnings per share of 31 cents beat S&P's estimate by 2 cents. S&P sees 2003 Rituxan sales at $1.47 billion, and sees U.S. Herceptin sales at $405 million and U.S. Xolair sales of $20 million.

S&P is raising its 2003 earnings per share estimate on Genentech to $1.20, from $1.18, and is upping the 2004 estimate to $1.42, from $1.37. S&P sees an earnings-per-share growth rate at 25% through 2007. On a relative valuation basis, S&P thinks Genentech's 2004 p-e-to-growth rate of 2.2, vs. rival Amgen's rate of 1.3, fairly reflects very high expectations for sales of Genentech's experimental cancer therapy, Avastin.

Supervalu (SVU ): Maintains 3 STARS (hold)

Analyst: Joseph Agnese

The grocery chain reported May-quarter operating earnings per share of 55 cents, vs. 57 cents -- 3 cents ahead of S&P's estimate. Retail sales grew 5.1% on a 4.7% rise in square feet and a 0.4% gain in comp-store sales. Retail margins narrowed on higher employee costs and a change in store mix, reflecting acquisitions and new stores. Distribution sales rose 1.3% through new business with existing customers, and segment margins were flat. S&P thinks the downside is limited. Shares are trading at 11 times S&P's fiscal 2004 (Feb.) earnings per share estimate of $2.08 -- at the low end of a historical range. Still, S&P remains cautious on Supervalue pending an improved environment.

Yahoo! (YHOO ): Maintains 3 STARS (hold)

Analyst: Scott Kessler

The Internet media company posted GAAP earnings per share of 8 cents, vs. 3 cents, in line with S&P and Wall Street's estimates. Revenues rose 42%, fueled by a 44% rise in marketing services revenues (68% of the total), which reflects an increasing mix of traditional advertisers and continued success in the sponsored-search business. However, operating margin was negatively impacted by product development and general and administrative costs that were higher than S&P expected. Despite p-e and p-e-to-growth rates that are higher than those of peers and the S&P 500, S&P views Yahoo's growth prospects, improving profitability, and execution as warranting a hold opinion.

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