S&P Says Buy Walgreen

Walgreen (WAG ): Reiterates 5 STARS (buy)

Analyst: Joseph Agnese

Discount retailer Walgreen posted February-quarter operating earnings per share of 41 cents, vs. 36 cents, in line with S&P's estimate. Comp-store sales rose 11.5%, as previously reported, with prescription-drug sales rising 15.5%. S&P believes Walgreen continues to grow share across almost all product categories. Expansion of the lower margin prescription-drug business, increased 24-hour store service, and higher insurance costs pressured margins. Plans are on track for the addition of 450 new stores in fiscal 2004 (Aug). S&P is maintaining the fiscal 2004 earnings per share estimate of $1.31, and is keeping the 12-month target price of $43, based on S&P's discounted cash-flow and price-earnings analyses.

Qualcomm (QCOM ): Maintains 5 STARS (buy)

Analyst: Kenneth Leon, CPA

Qualcomm announced Monday a global license agreement with UTStarcom, a global leader in Internet Protocol access technologies with a major presence in Asia. UTStarcom will pay royalties on wireless equipment that uses CDMA2000, WCDMA, or TD-SCDMA systems. S&P takes note of TD-SCDMA, in particular, since Qualcomm is in discussions with China's domestic suppliers on its legal claim to receive royalties when TD-SCDMA becomes commercial in 2005 or 2006. Last week at an analyst meeting, Qualcomm said it was confident that its patents cover TD-SCMDA. S&P's 12-month target price remains $80.

Lucent Technologies (LU ): Maintains 3 STARS (hold)

Analyst: Kenneth Leon, CPA

On Monday, Verizon Wireless awarded multi-year, wireless contracts to Lucent for $525 million and to Nortel Networks for $167 million. The 3G upgrades will use technology called CDMA2000 1XEV-DO (Evolution-Data Optimized), developed by Qualcomm, which ships 3G chipsets and receives royalties on CDMA2000 and wideband CDMA (WCDMA) equipment. S&P thinks Lucent shares may trade higher, reflecting its larger share of the order compared with Nortel. With valuation near its peers, S&P would hold Lucent shares. Also, S&P says it would not add to positions in Nortel, due to delays in its 10K report.

Smurfit-Stone Container (SSCC ): Maintains 5 STARS (buy)

Analyst: Bryon Korutz

Paperboard and packaging maker Smurfit-Stone said on Friday that it expected a first-quarter loss of 22 cents to 25 cents. S&P is widening the first-quarter loss estimate to 25 cents, from 6 cents, and is lowering the full year 2004 earnings per share estimate to 28 cents from 55 cents, on greater than expected costs for energy, fiber, and employee benefits, and lower packaging prices. S&P believes the pricing outlook for Smurfit-Stone is improving. In fact, the company has captured a portion of its $40-per-ton price increase for containerboard, and S&P sees continued firming in the future. With shares below S&P's 12-month target price of $23, based on S&P's discounted cash-flow model and peak p-e multiple, S&P would buy Smurfit-Stone.

Boston Scientific (BSX ): Reiterates 4 STARS (accumulate)

Analyst: Robert Gold

Boston Scientific provided an update regarding the progress of the recent U.S. launch of its Taxus Express2 drug-coated coronary stent system. During the first two weeks of the launch, the company says it booked Taxus revenues of $42 million, with about 92,000 units shipped. Preliminary figures suggest that Taxus sales in the first quarter will likely exceed the high end of Boston Scientific's $52 million to $75 million target. Still, S&P is keeping the total U.S. cardiology first-quarter sales estimate at $400 million, and is retaining the earnings per share forecast at 27 cents. S&P believes the shares remain compelling as the Taxus story continues to unfold. S&P's 2004 earnings per share estimate remains $1.65.

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