S&P: Still Buy Alcan

Plus analysts' opinions on Bank of America, Intel, and more

Alcan (AL ): Reiterates 4 STARS (buy)

Analyst: Leo Larkin

Alcan pre-announced that fourth-quarter earnings per share will trail the third quarter due to the negative impact of the decline in the U.S. dollar, higher energy costs and goodwill impairment. We are cutting our $2.57 earnings per share estimate for 2004 to $1.94 on that basis. Based on our assumption for a continued rise in the price of alumina and aluminum, and less impact from currency and energy in 2005, we are keeping our 2005 estimate unchanged at $3.60. With a yield of 1.0% and a p-e of 13 times our 2005 estimate, we believe Alcan is an attractive vehicle for participating in an aluminum market upturn. Our 12-month target price stays $63.

Bank Of America (BAC ): Reiterates 5 STARS (strong buy)

Analyst: Evan Momios, CFA

Bank of America posts fourth-quarter earnings per share of 94 cents, vs. 92 cents, a penny below our estimate but in line with the Street consensus. Results reflect strong momentum across all businesses, good credit quality and cost savings from the ongoing integration of Fleet. The company expects 2005 operating earnings per share to exceed $4.00 in a rising interest rate environment with a flattening yield curve. We are keeping our 2005 operating earnings per share estimate at $4.00, compared to $3.80 reported in 2004. We are also keeping our 12-month target price at $54, based on our terminal p-e and discounted cash flow analyses.

Intel (INTC ): Maintains 3 STARS (hold)

Analyst: Amrit Tewary

Intel reorganized its corporate structure, in line with its strategy to drive development of technology platforms based on Intel chips and software. The new groups are the mobility group, the digital enterprise group, the digital home group, the digital health group, and the channel products group. Our initial analysis suggests the reorganization makes sense for the company, since the new structure should enable more timely and focused decision making at the business unit level. Our 12-month target price remains $26, based on our p-e and price-to-sales analyses.

AT&T (T ): Maintains 3 STARS (hold)

Analyst: Todd Rosenbluth

We expect AT&T to report fourth-quarter earnings per share of 56 cents, vs. a year-ago 43 cents, on Jan. 20. We project revenues will be down 12%, believing that AT&T's reduced marketing presence from the summer helped add to top-line erosion and allowed the Baby Bells to take consumer long-distance market share. We hope to hear details about consumer acceptance of AT&T's VoIP offering and its planned wholesale wireless offering, likely to launch in mid-2005. We believe EBITDA margins narrowed, but depreciation expenses declined significantly. At a discount to peers we see as justified, and a dividend yielding 5.0%, we would hold AT&T.

Yahoo (YHOO ): Reiterates 4 STARS (buy)

Analyst: Scott Kessler

Yahoo yesterday announced a multi-year partnership with Verizon Communications to offer a co-branded broadband offering. Beginning this summer, Yahoo will offer content services to Verizon's 3.3 million DSL subscribers, and collect associated monthly per-subscriber fees. Yahoo now has broadband relationships with the two largest providers of DSL service in the U.S., SBC Communications, and Verizon, as well as British Telecom and Rogers Cable. Yahoo reports fourth-quarter results this afternoon, and we are forecasting earnings per share of 34 cents.

Verizon Communications (VZ ): Maintains 5 STARS (strong buy)

Analyst: Todd Rosenbluth

Verizon announced a multi-year Internet content agreement with Yahoo! to provide customized services to its approximately 3.3 million DSL subscribers as of September 2004. Although terms were not disclosed, we view such an alliance as positive for Verizon, believing that broadband, via DSL and fiber to the premise, should be a key driver of Verizon's prospects in 2005. Verizon is also trying to differentiate itself from cable carrier competition. We await Verizon's fourth-quarter earnings per share results, due out Jan. 27, but believe the shares remain undervalued relative to peers.

Blockbuster (BBI ): Reiterates 2 STARS (sell)

Analyst: Amy Glynn, CFA

Blockbuster says it remains committed to pursuing an acquisition of Hollywood Entertainment, which we expect would entail raising its offer price from $11.50 per share to beat Movie Gallery's merger pact with Hollywood at $13.25. Blockbuster says it is evaluating the price it would be willing to offer for Hollywood, which would also include a $27 million breakup fee to Movie Gallery. We continue to view the potential merger of Blockbuster/Hollywood as negative, since we think it would boost Blockbuster's presence in a declining retail video rental space. Our 12-month target price remains $8.50.

JDS Uniphase (JDSU ): Maintains 3 STARS (hold)

Analyst: Kenneth Leon, CPA, Ari Bensinger

The company released preliminary results for the December-quarter at the low end of its previous guidance for sales. JDS Uniphase expects second-quarter sales of $180 million, compared with $194.5 million posted in the September-quarter, and a December-quarter loss of 2 cents compared to our one-cent loss estimate. The lower sales in the December-quarter are attributed to reduced sales from a major customer. This, along with new product start-up costs and narrowed margins. JDS Uniphase will announce final results for its second quarter on Jan. 26, 2005. For fiscal 2006 (ending June), we still see earnings per share of 2 cents. We are maintaining our 12-month target price of $3.50, which is equal to 3 times book value.

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