S&P Keeps 'Buy' on Adobe Systems

Also: analysts' opinions on Biovail, AutoZone, Xilinx, Biogen Idec, and Cooper Companies

Adobe Systems (ADBE ): Reiterate 5 STARS (buy)

Analyst: Scott Kessler

We are raising our fiscal year 2005 (November) EPS estimate by 5 cents, to $1.65, following our lowering of Adobe's anticipated income tax rate. Adobe's annual tax rate has fallen 650 basis points from fiscal year 1999 to fiscal year 2003, and we expect Adobe to continue executing on its tax strategy and achieve 30% rates in fiscal 2004 and fiscal 2005. Our fiscal 2004 and fiscal 2005 forecasts exceed Street estimates, based on our optimism about the company's products and operating leverage. Adobe's p-e and p-e-to-growth are below the S&P 500 Software Industry. Our discounted cash flow-based 12-month target price remains $45. Adobe will report first-quarter results on Mar. 18.

Biovail (BVF ): Keep 3 STARS (hold)

Analyst: Herman Saftlas

Biovail posts a fourth-quarter loss of 60 cents, vs. a loss of 65 cents. Adjusting for unusual events, fourth-quarter EPS is 28 cents, 1 cent above our estimate. Reflecting a sales drop in legacy drugs and higher selling, general, and administrative expenses, 2004 EPS guidance was cut to $1.25 to $1.70 from $2.00 to $2.20. Biovail remains under scrutiny by the SEC and the Ontario Securities Commission. On the plus side, we see sales of Wellbutrin XL tripling in 2004 and view the R&D pipeline as robust, with 10 projects added in 2003. Our 2004 EPS estimate drops to $1.40 from $1.90. We cut our 12-month target by $4 to $21, 15 times our 2004 EPS estimate and a 20% discount to peers.

AutoZone (AZO ): Reiterate 4 STARS (accumulate)

Analyst: Yogeesh Wagle

AutoZone posts February-quarter EPS of $1.04, vs. 79 cents a year ago, 2 cents above our estimate. Total sales rose 3.4% but same-store sales were flat, less than we expected, as a 1% retail drop offset a 10% commercial sales gain. Gross margin improvement of 180 basis points and repurchase of 4 million shares bolstered EPS growth. We see the company's topline growth picking up in the second half of fiscal year 2004 (ending August) on improved in-stock positions, new merchandise introductions, and the ongoing rollout of commercial sales programs. Trading at 13 times our $6.53 fiscal 2004 EPS estimate, below peers and the S&P 500 index, we believe AutoZone shares have appeal.

Xilinx (XLNX ): Reiterate 5 STARS (buy)

Analyst: Tom Smith, CFA

The maker of programmable logic devices guides March-quarter revenues to 9% to 10% increase from the December quarter, up from a prior forecast of 7% to 10%. We had modeled 9% and 24 cents EPS, and are raising those figures to 10% and 25 cents. We are raising our fiscal year 2004 (ending March) EPS estimate by 1 cent, to 73 cents, and fiscal 2005's by 3 cents, to $1.15. Applying the present forward p-e of 39 times our calendar 2004 EPS estimate of $1.08 to our calendar 2005 estimate of $1.40 indicates a price potential to $55. Our forward sales analysis indicates a similar potential and we are maintaining our 12-month target price at $55.

Biogen Idec (BIIB ): Reiterate 4 STARS (accumulate)

Analyst: Frank DiLorenzo, CFA

Biogen Idec posts pro forma fourth-quarter EPS of 24 cents, vs. 32 cents a year ago, 6 cents below our view due to $28 million in inventory write-offs and higher R&D and SG&A spending. Product sales were solid, led by $310 million in Avonex sales, $14 million above our view. Biogen Idec guides for 2007 EPS above $2.60, while we see EPS even higher. We expect Antegren approval by the second quarter of 2005 and greater pipeline visibility in 2005. We are keeping our 2004 EPS estimate at $1.47 and see 2005 at $1.82. On a revised net present value analysis of products/pipeline, including peak Antegren sales of $1.3 billion, up from $1 billion, we are raising our target price to $66 from $62.

Cooper Companies (COO ): Upgrading to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Frank Connelly

Jan-quarter EPS of 55 cents, vs. 44 cents a year ago, is 2 cents ahead of our estimate, reflecting stronger specialty contact lens sales than expected, favorable currency trends, and lower interest expense. We are raising our fiscal year 2004 (October) EPS estimate to $2.54 from $2.50, and look for an 18% rise in fiscal 2005 to $3.00. We believe specialty lens market share gains, on continued new product launches and amid low double digit market growth, should drive EPS growth. Our new 12-month target price of $60, up today from $46, is supported by our discounted cash flow-based analysis and assumes Cooper stock will trade at 20 times our fiscal 2005 estimate.

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