S&P: Still Accumulate Cisco

Also: analysts' opinions on H.J. Heinz and Cognos

Cisco Systems (CSCO ): Maintains 4 STARS (accumulate)

Analyst: Megan Graham-Hackett

In an Securities & Exchange Commission filing, Internet-networking gear giant Cisco provided details of its anticipated stock-option grant program, stating that its board of directors approved the granting of merit-based stock options to eligible employees to buy 162 million shares, which is about 2.3% of shares outstanding, including 1.5 million for Cisco president and CEO John Chambers, at a strike price of $19.18 per share. The year-ago grant was 141 million, about 2% of shares outstanding at that time. We're keeping our fiscal 2005 (Juy.) earnings per share estimate at 81 cents, but lowering our S&P Core earnings per share estimate to 51 cents from 53 cents, reflecting our estimate of stock-option expense.

H.J. Heinz (HNZ ): Maintains 3 STARS (hold)

Analyst: Richard Joy, Howard Choe

Heinz posted July-quarter earnings per share of 55 cents, vs. 51 cents, 1 cent below our estimate. Sales grew 6%, driven by positive foreign exchange and a 1.9% volume/mix gain. Volume growth was led by North America, up 7%, aided by new Ore-Ida products. Pricing was a 1% drag on sales. Operating margins slipped 260 basis points on higher trade promotions and rising commodity and energy costs. Despite profit pressures, we would hold Heinz on our view of improving volume trends and 3% yield. We maintain our fiscal 2005 (Apr.) earnings per share estimate of $2.38, and see Heinz fairly valued at a a p-e of 17 applied to the calendar-year 2004 earnings per share estimate, in line with peers.

Cognos (COGN ): Maintains 3 STARS (hold)

Analyst: Richard Stice, CFA; Ari Bensigner

Cognos, Canada's largest software maker, offered to acquire Frango, a Stockholm-based company that specializes in consolidation and financial reporting solutions, for $52 million in cash. We think the acquisition should strengthen Cognos' product set in the corporate performance-management solution arena. At 1.5 times trailing 12-month sales, we view the purchase price as reasonable. We believe that Cognos' robust pipeline of new business will somewhat offset a deterioration in the overall information-technology spending environment. Based on our discounted cash-flow analysis, our 12-month target price is $34.

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