S&P: GE Still a 'Hold'

General Electric (GE ): Maintains 3 STARS (hold)

Analysts: Robert Friedman, Leo Larkin

GE reported fourth quarter earnings per share of 45 cents, vs. 31 cents one year earlier, on a 4.1% revenue gain, shy of our 47-cent estimate. Full-year 2003 earnings per share were $1.55, vs. $1.51. The fourth-quarter earnings per share gain largely reflects the absence of 14 cents in year-earlier charges from the Employers Reinsurance arm to provide for insurance claim reserves. For the fourth quarter and the full year, power systems and aircraft engines were a drag on earnings per share. We continue to believe that the company's enormous revenue and asset base make it unlikely for it to be able to increase earnings per share and free cash flow at a 10% compound growth rate, and we reiterate our hold recommendation.

Home Depot (HD ): Maintains 4 STARS (accumulate)

Analysts: Yogeesh Wagle, Amrit Tewary

Home Depot expects to post fiscal 2005 (ending January) comparable-store sales gains of 3% to 6%, total sales growth of 9% to 12%, and earnings growth of 10% to 14%, excluding the impact of a change its accounting for cooperative advertising funds received from vendors. In addition, the company projects $3.7 billion of capital spending during the year, including investments in store modernization and maintenance, technology and the addition of 175 new stores. For fiscal 2004, Home Depot now sees comparable-store sales up 3.8%, total sales advancing 11%, and an earnings per share gain of 15% to 17%. Our 12-month target price of $41 values the stock at a slight premium to the S&P 500.

Abbott Laboratories (ABT ): Maintains 4 STARS (accumulate)

Analyst: Frank DiLorenzo, CFA

Abbott reported fourth quarter pro forma earnings per share of 65 cents vs. 55 cents, a penny above our estimate. Humira sales of $119 million were $14 million above our forecast. Fourth-quarter U.S. pharmaceutical sales rose 28% to $1.594 billion, $84 million above our projection. The company sees 2004 Humira sales exceeding $700 million. We expect strength in all business segments and EPS upside if costs are well controlled. We also consider Abbott's pipeline underappreciated. We are lowering our 2004 EPS estimate to $2.48 from $2.51 but still see $2.82 for 2005. Our discounted cash-flow calculations are unchanged, and our 12-month target price remains $54.

Energizer (ENR ): Maintains 4 STARS (accumulate); Gillette (G ): Maintains 3 STARS (hold)

Analyst: Howard Choe

On Jan. 15, a Massachusetts district court denied Gillette's preliminary injunction motion to halt sales of Schick's Quattro razor, which is a competing product of Gillette's Mach3. Schick is a unit of Energizer. The judge determined that Gillette had no reasonable likelihood of success on its infringement claim. We see Gillette likely to bring the case to trial, a potentially lengthy process. We believe the Quattro is a legitimate competitor and will have an impact on the premium shaving systems market. However, Gillette still holds the lion's share of the market and is ramping up innovation.

Texas Instruments (TXN ): Maintains 5 STARS (buy)

Analyst: Thomas Smith, CFA

TI announced that COO Rich Templeton will replace Tom Engibous as president and CEO on May 1, with Engibous remaining chairman. The move is part of a planned succession. We view the move positively, in that separation of the chair and CEO slots favors independence for the board, and because Templeton demonstrates strong leadership, in our opinion. We view the new lineup as quite capable of pursuing the digital signal processing focus that Engibous has shaped for TI since he seized the reins in 1996. The shares hit a 52-week high on Jan. 15.

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