Merck Tumbles on Texas Verdict

Autodesk posts strong profits, Gap lowers outlook for the year, and more of Friday's stocks in the news

Merck (MRK ) shares fell after a Texas jury awards total damages of $253 million in the case of the death of a man who took its painkiller Vioxx. Merck says it will appeal the verdict on its belief the plaintiff did not meet the standard set by Texas law to prove Vioxx caused the man's death.

UBS Financial upgrades Coca-Cola (KO ) to buy from neutral. Analyst Kaumil Gajrawala believes a turnaround is happening now, and expects an acceleration in sales growth to lead to multiple expansion, similar to 1994.

Prudential says strong back half fundamentals coupled with valuation anomaly drive compelling buying opportunity for International Business Machines (IBM ) shares.

Lehman Brothers upgrades Delphi (DPH ) to overweight from underweight.

Autodesk (ADSK ) posts 30 cents, vs. 16 cents second-quarter earnings per share (GAAP basis) on a 33% revenue rise. The software maker posts 29 cents non-GAAP EPS. It sees sequentially flat third-quarter EPS and revenue, and $1.20-$1.25 fiscal year 2006 GAAP EPS on revenue of $1.49 billion to $1.51 billion.

Gap (GPS ) posts 30 cents, vs. 21 cents, second-quarter earnings per share despite 3% same-store sales drop. The retailer cuts fiscal year 2006 EPS estimate to $1.30-$1.34. It notes August month-to-date results were below expectations. S&P cuts estimates. Merrill reportedly downgrades the stock.

AnnTaylor Stores (ANN ) posts 10 cents, vs. 41 cents, second-quarter earnings per share on 3.9% same-store sales drop and 7.6% total sales rise. It notes a decrease in spring season gross margins. It remains comfortable with $1.17 fiscal year 2006 EPS guidance. The company sets a $100-million stock buyback.

J.P. Morgan upgrades Vertex Pharmaceuticals (VRTX ) to overweight from neutral.

Aeropostale (ARO ) posts 13 cents, vs. 19 cents, second-quarter earnings per share on 2.2% lower same-store sales. The apparel retailer sees 50-53 cents third-quarter EPS, and 67-70 cents fourth-quarter EPS; low-single-digit comp sales increases in both the third and fourth quarters. Prudential upgrades and S&P keeps buy on the stock.

Scansource (SCSC ) posts 73 cents, vs. 69 cents fourth-quarter earnings per share on a 14% rise in revenue. It sees $360 million to $385 million in first-quarter revenue vs. the fourth-quarter's $381.2 million. It notes first-quarter EPS will be negatively affected by options expensing resulting in 3 cents per share.

Ditech Communications (DITC ) posts 6 cents first-quarter loss per share, vs. 30 cents EPS, as revenue declined 59% to $10.3 miliion. It sees revenue at the same level for the second quarter, 60% gross margin, and operating expenses of $11 million as the company absorbs acquisition.

Gymboree (GYMB ) posts narrower-than-expected 12 cents second-quarter loss from continuing operations, vs. 12 cents loss, despite 9% higher same-store sales and 14% higher total retail sales. The retailer sees 20-22 cents third-quarter EPS from continuing operations on flat to slightly positive comps.

Sports Authority (TSA ) posts 53 cents, vs. 45 cents, second-quarter earnings per share as improved gross margins and cost controls offset flat same-store sales and 2% total sales rise. The retailer raises fiscal year 2006 EPS guidance to $1.96-$2.01 from $1.90-$1.97.

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