S&P Ups Motorola

Motorola (MOT ): Upgrades to 5 STARS (buy) from 4 STARS (accumulate)

Analyst: Kenneth Leon, CPA

Motorola posted strong earnings per share of 18 cents, vs. 7 cents, excluding items, well above S&P's 9 cents estimate and the Street's 7 cents. Sales rose 42%, driven by strong handset sales and double-digit growth in all businesses. Motorola shipped 25.3 million handsets in the first quarter. S&P thinks Motorola is gaining share. Also, margins widened in the first quarter year-over-year due to cost controls. S&P sees strong momentum for the second quarter and the rest of 2004, and as a result, is raising the 2004 earnings per share estimate by 23 cents, to 73 cents, and upping the 2005 earnings per share estimate by 26 cents, to 86 cents. The price target is being raised to $25, from $20, based on a sum-of-the-parts valuation. With Motorola priced below peers at 1 times the 2004 sales estimate, S&P recommends investors purchase the shares.

Walt Disney (DIS ): Maintains 3 STARS (hold)

Analyst: Tuna Amobi, CFA, CPA

In an expected restructuring move, ABC Cable Networks Group president Anne Sweeney and ESPN president George Bodenheimer were named co-heads of Disney's Media Networks unit. With former ABC Entertainment chairman Lloyd Braun and president Susan Lyne recently gone, Sweeney added the oversight of ABC broadcast net (excluding sports) and the Touchstone TV production unit to cable networks Disney Channel and ABC Family, and named four lieutenants. Sweeney is a seasoned executive with a solid track record, but pulling ABC from its prime-time ratings quandary could be her greatest challenge yet.

General Motors (GM ): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Efraim Levy, CFA

GM posted first-quarter earnings per share of $2.25 vs. an adjusted $1.84, much better than S&P's $1.97 estimate and the Street mean of $1.79. S&P is raising the 2004 earnings per share forecast to $7.02 to reflect the quarter's outperformance, S&P's more favorable outlook for Asian and financial-services income, and a reduced tax rate. Based on peer comparative and historical price-earnings analyses, S&P is raising the 12-month target price to $63, from $58. Risk factors include too-high inventory levels, intense competition, and sizable health-care and foreign pension obligations.

Wyeth (WYE ): Maintains 5 STARS (buy)

Analyst: Herman Satflas

Wyeth posted first-quarter earnings per share of 63 cents, vs. 54 cents, 8 cents ahead of S&P's estimate. First-quarter earnings per share is before a milestone payment of 7 cents to Solvay, but after a gain of 5 cents from the sale of an insomnia drug. Revenue growth of 9% exceeded S&P's projections, reflecting strength in Effexor, Enbrel, Zosyn, and alliance products. Although Wyeth is vulnerable to diet-drug headline risk, S&P believes it has the financial resources to deal with this issue. S&P expects Wyeth to generate 8% to 10% earnings growth over the the 2004-07 period, and is keeping the $49 target price, which is supported by discounted cash-flow and forward relative p-e models.

C.R. Bard (BRC ): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Robert Gold

Bard posted first-quarter operating earnings per share of $1.19, vs. 89 cents, far above S&P's $1.01 estimate. The upside reflected significant contributions from new products, including the Recovery vena cava filter, HemoSplit dialysis catheter, and Fluency stent graft, along with wider gross margins and lower R&D spending than S&P modeled. Bard left its 2004 guidance at $4.45 to $4.50, in part due to increased R&D costs in coming quarters. However, S&P raised the 2004 earnings per share estimate by 10 cents, to $4.55 and upped the 2005 estimate by 15 cents, to $5.15. S&P also raised the 12-month target price to $118, from $100. This assumes a p-e of 23 times the 2005 earnings per share estimate, which is in line with peers.

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