S&P Says Buy Sysco

Sysco (SYY ): Reiterates 5 STARS (buy)

Analyst: Joseph Agnese

The hospitality-services company posted earnings per share of 34 cents, vs. 28 cents -- 2 cents above S&P's estimate. Sales grew 10.8%, on 2.7% real growth, 7.3% food-cost inflation, and 0.8% from acquisitions. Sysco continues to focus on eliminating its less profitable customer accounts while expanding its reach through acquisitions and internal growth. S&P is raising its fiscal 2004 (June) earnings per share estimate by 3 cents, to $1.41 on an expectation of benefits from lower food-cost inflation, higher sales of private-label goods, and acquisition and technology efficiencies. S&P is raising the 12-month target price by $2, to $45, based on discounted cash-flow and price-earnings analyses.

American Standard (ASD ): Maintains 5 STARS (buy)

Analyst: Michael Jaffe

This maker of air conditioners, kitchen and bath fixtures, and vehicle control systems posted fourth-quarter earnings per share of $1.15 before 1 cent of net charges, vs. $1.01 -- a penny ahead of S&P's estimate. Results reflect strength in residential air conditioning, bath and kitchen, and vehicle controls, which outweighed still-soft commercial air conditioning markets. Based on S&P's forecast of better global economies in 2004, S&P is raising the 2004 earnings per share estimate to $6.50, from $6.30, and sees $7.30 in 2005. S&P thinks American Standard is in the midst of an earnings per share up cycle. The shares are undervalued at 17 times S&P's 2004 estimate, below the S&P 500 index. Using a blend of relative p-e and discounted cash-flow analyses, S&P is raising the target price to $134, from $130.

Lexmark International (LXK ): Reiterates 4 STARS (accumulate)

Analyst: Megan Graham-Hackett

Lexmark posted fourth-quarter earnings per share of $1.05 vs. 90 cents, well ahead of the 92 cents estimate. Results reflected a 13% rise in revenues to $1.37 billion, vs. S&P's $1.29 billlion estimate, and lower-than-expected selling, general, and administrative expenses. However, 23% growth from a year ago in inkjet hardware outpaced supplies, causing gross margin to be a bit below S&P's estimate. Lexmark sees first-quarter earnings per share of 79 cents to 89 cents, in line with S&P's 85 cents estimate, and the full 2004 estimate remains $3.70. At 21 times that estimate, Lexmark is trading slightly above peers, but with the company executing well and with strong cash flow, S&P believes these shares are undervalued.

Visx (EYE ): Reiterates 4 STARS (accumulate)

Analyst: Markos Kaminis

S&P believes this leading manufacturer of laser eye-correction products will benefit from 2003's FDA approval for its CustomVue procedure, an improving economy, growing discretionary spending for corrective procedures, and a growing awareness of the procedure. S&P is raising the 2003 earnings per share estimate to 46 cents, from 43 cents, and 2004's to 75 cents, from 69 cents. S&P's assumption that 2005 earnings per share could rise 30% above 2004's, and a p-e of 30, suggests a potential share price of $29. S&P's discounted cash-flow analysis indicates intrinsic value at $32. Blending these, S&P is upping the target price to $31, from $25.

Schering-Plough (SGP ): Maintains 3 STARS (hold)

Analyst: Herman Saftlas

Schering-Plough posted a fourth-quarter loss of 12 cents, vs. earnings per share of 21 cents. Before special charges, earnings per share was 1 cent, or 2 cents below S&P's estimate. Results were hurt by sharply lower sales of Clarinex and Intron A, heavy costs for a voluntary retirement program, and the absence of income from antiulcer pill Losec. With negative trends expected to continue, S&P now projects a loss of 5 cents per share for 2004, vs. S&P's previous earnings per share estimate of 25 cents. On the plus side, S&P sees a turnaround in 2005, lifted by the new Zetia cholesterol franchise and cost controls. At about 2.5 times sales, the drugmaker has the lowest price/sales ratio of big pharmas. S&P's 12-month target price remains $18.

Cytec (CYT ): Upgrades to 4 STARS (accumulate), from 3 STARS (hold)

Analyst: Richard O'Reilly

The specialty chemicals maker's fourth-quarter earnings per share is 36 cents, vs. 49 cents -- below S&P's 38 cents estimate and at the bottom end of the company's guidance. Sales rose 5% as benefits of recent acquisitions and foreign exchange were offset by 4% lower volume. Earnings were helped by 3 cents from a lower tax rate. Based on new company guidance, S&P is raising the 2004 estimate to $2.55, from $2.50, vs. 2003's $2.27. Cytec is selling at a below-peer-average 14.5 times S&P's 2004 estimate. While asbestos exposure is still a concern, S&P says a more positive earnings outlook warrants a p-e that's closer to peers. Thus, S&P is raising the target price to $43, from $40.

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