Wall Street Boos Schering-Plough's News

That clarity wasn't aided by Hassan's absence at an early evening telephone conference call on Thursday for analysts and investors, provoking some Wall Streeters to compare Hassan's no-show performance to the lack of contact that characterized their relationship with his predecessor Richard Jay Kogan.

Hassan joined Schering-Plough in April. He has been emphasizing the distance between his management and the previous regime, using phrases in a Thursday press release and in a message to stockholders such as "the situation we inherited," and the "inherited regulatory and legal issues."

But analysts, who were surprised by the 2004 earnings guidance, also barked at the way the news was presented.

"Absentee landlord" was a headline in a Lehman Brothers report to clients on Friday. The absence of top management for the conference call "was basically a disaster as no additional 'color' was given in any regard -- not a new phenomenon with [the company] unfortunately," said a Friday report from Prudential Financial.

Schering-Plough's announcement sent analysts scurrying to recheck and amend their estimates and wonder why there was such a gap in what they predicted and what Schering-Plough revealed.

"We are reviewing our model," said Michael Krensavage, of Raymond James, in a research note Friday. He had predicted 2004 earnings per share of 66 cents; now it will be less than 48 cents.

He suggested that based on 2004 EPS estimates, the company would be worth more as a takeover candidate than as a stand-alone entity. Krensavage rates the stock as market perform. He doesn't own shares; his firm doesn't have an investment banking relationship with Schering-Plough.

Goldman Sachs analyst James Kelly immediately cut his EPS for 2004 to 34 cents from 59 cents, and he cut the 2003 EPS to 42 cents from 48 cents. He continues to rate the stock as underperform; he doesn't own shares but his Friday research note says that his firm expects to receive or seek compensation for services in the next three months from the company.

Schering-Plough is "an absolute mess at present," said Tim Anderson, of Prudential Financial, in a Friday research note, as he cut his 2004 EPS estimate to 30 cents from 63 cents and his 2003 estimate to 36 cents from 45 cents.

But Anderson maintains his buy rating on Schering-Plough, with the good news being the expectations that a joint venture with Merck will produce big sales in a few years with their experimental cholesterol reducing pill that combines Merck's popular Zocor with the new Zetia being co-marketed by the companies. "We believe investors will continue to be intrigued with Schering-Plough's longer-term prospects," said Anderson, who doesn't own shares and whose firm doesn't have an investment banking relationship with Schering-Plough.

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