Stocks to Watch Thursday: Mattel, Cemex, Imsa, Vitro

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M&A Earnings/revenue Offerings/stock actions Analyst actions Miscellany

(Updated from 3:01 p.m. EDT)

The No. 1 manufacturer of semiconductor equipment, Applied Materials (AMAT Quote), posted a fiscal third-quarter 70-cent profit, besting the 28-broker forecast by 2 cents and exceeding the year-ago 31-cent result. Additionally, Applied Materials reported an 83% surge in sales. The chipmaker's earnings are widely viewed as a proxy for the wider tech sector. UBS Warburg cut its price target to 90 from 115.

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Retailing giant Gap (GPS Quote) posted second-quarter earnings of 21 cents a share, a penny ahead of the 22-analyst estimate and down from the year-ago earnings of 22 cents. The company warned its third-quarter results could fall to or below the 35 cents it earned in the year-ago period if current business conditions continue.P/>After the announcement, Bear Stearns cut its rating on Gap to attractive from buy and Deutsche Banc Alex. Brown cut Gap to market perform from buy. TSC's Katie Hobson has been keeping an eye on developments in the Gap as well as in the broader retail sector.

Kmart(KM Quote) also reported second-quarter earnings, posting results of 5 cents a share, excluding a charge for strategic actions. The number was in line with the 16-analyst estimate, but down from year-ago earnings of 26 cents a share.

Also, the retailer announced that it planned to invest close to $2 billion in infrastructure improvements over the next two years in an effort to boost earnings and store operations.

Mergers, acquisitions and joint ventures

Amazon.com (AMZN Quote) and Toys R Us (TOY Quote) said they will create a co-branded toy and video-game store that will be launched in the fall. Amazon said it would get warrants to buy up to 5% of Toysrus.com.

Car rental company Avis (AVI Quote) said it closed its deal to create a joint venture with France's BNP Paribas and used proceeds from the deal to retire $1 billion in term debt. Under the transaction, announced in April, BNP agreed to pay $800 million in cash for 80% interest in the joint venture, which will offer car fleet management and leasing services to firms. Avis' board also authorized a stock buyback plan of up to $100 million worth of common stock.

British Airways (BAB Quote) and KLM (KLM Quote) said they have agreed to extend their exclusivity period for talks, saying the talks have been constructive and that important progress has been made. British Airways and KLM said a business rationale for a potential merger exists and that they have allowed for several more weeks of talks.

Warburg Pincus said it will invest $400 million in Lucent(LU Quote) spinoff Avaya. For the investment, Warburg Pincus will receive Avaya participating preferred stock, which can be converted into about 5% of Avaya common stock, and a place on Avaya's board.

Progenics Pharmaceuticals(PGNX Quote) and Pharmacopeia(PCOP Quote) announced the initiation of two new collaborative programs to discover orally active antiviral agents. The programs are in addition to an existing collaboration signed between the two companies in March.

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Earnings/revenue reports and previews

Flowers Industries(FLO Quote) reported second-quarter earnings of 6 cents a share, missing the nine-analyst estimate by a penny, but up from the year-ago loss of 28 cents a share. The company's struggle to turn around its Mrs. Smith's frozen pies division was blamed for the miss.

Lands' End(LE Quote) posted a second-quarter loss of 6 cents a share, missing the 10-analyst estimate by 13 cents and significantly down from year-ago earnings of 14 cents. The company called the loss for the quarter "unexpected and disappointing." Based on sales trends earlier in the quarter, Lands' End had already lowered its outlook.

The company, which is reportedly seen as a potential buyout target, said overall sales trends in the quarter were weaker than expected, with flat sales in its core business segment and specialty business segment. But the Internet sales were 70% higher compared to last year, and sales in the international business segment -- comprising operations in Japan, the United Kingdom and Germany -- were up about 2% from last year.

Lone Star Steakhouse & Saloon (STAR Quote) announced that it will take a charge of about $350,000, or a penny a share, in the third quarter related to restaurant closures. Lone Star said the move won't have "significant impact" on its financial position or operations.

Mattel(MAT Quote) said it's expecting about $100 million in lost sales in the second half of 2000 because of a worldwide shortage of computer chips. Jill Krutick, an analyst with Salomon Smith Barney, told Reuters that the lost sales translate to about 5 cents a share in the second half of 2000.

Modis Professional Services(MPS Quote) posted second-quarter earnings of 13 cents a share, beating the 10-analyst estimate by a penny, but down from year-ago earnings of 27 cents a share.

Trigon Healthcare(TGH Quote) reported second-quarter earnings of 80 cents, excluding realized gains and losses and a one-time favorable tax benefit, beating the 14-analyst estimate by 2 cents. Because of the one-time tax benefit, there is no comparable year-ago figure. Its year-ago earnings excluding realized gains and losses was 49 cents a share.

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After Wednesday's CloseAtlantic Medical (MME Quote) posted second-quarter earnings of 19 cents a share, beating the 10-analyst estimate by a penny and exceeding year-ago earnings of 11 cents a share.

Bowne (BNE Quote), a provider of Document-management services, announced second-quarter earnings of 30 cents a share, topping the two-analyst estimate of a 26-cent result and improving upon year-ago earnings of 35 cents a share.

Crown Castle International (TWRS Quote) posted a second-quarter loss of 43 cents a share, wider than the four-analyst estimate of 39 cents and the year-ago loss of 22 cents.

Informix (IFMX Quote) announced a restructuring designed to streamline its operations and said it expects to take a related charge of $75 million to $90 million in the third quarter. The Internet software-maker also said it expects additional charges of $10 million to $15 million during the transition period of corporate realignment, which is expected to last through the first half of 2001. Additionally, Informix said it will begin its repurchase of 6.4 million shares on Aug 14.

Integrated Electrical Services (IEE Quote), a provider of electrical contracting, posted fiscal third-quarter earnings of 25 cents a share, in line with the four-analyst estimate but below the year-ago's 39 cents.

Home-furniture manufacturer La-Z-Boy (LZB Quote) posted first-quarter earnings of 21 cents a share, beating the five-analyst estimate by one cent but below the year-ago 25-cent profit. Although La-Z-Boy beat analysts' revised forecast, net income fell 2%, hurt by a slowdown in the furniture industry.

NetZero (NZRO Quote), a provider of free Internet access, posted pro-forma losses of 25-cents a share, narrower than the six-analyst expectation of a 29-cent loss.

The company added more than 900,000 registered users in the June quarter, bringing its total number of users to nearly 5 million at the fiscal year end and representing more than a 315% increase during the past year. TheStreet.com took a look at NetZero's business in an earlier story.

Six Flags (PKS Quote) posted second-quarter earnings of 12 cents a share, missing the seven-analyst estimate of 20 cents. The year-ago earnings of 15 cents included items. The company said its results were hurt by unseasonably rainy weather and lower temperatures than usual during the quarter.

Music and video retailer Trans World Entertainment (TWMC Quote) reported second-quarter earnings of 14-cents a share, beating the five-analyst estimate of 11-cent earnings and the year-ago 11-cent outcome.

Unwired (UNWR Quote) posted a second-quarter loss of 21 cents, narrower than the single-analyst estimate of a loss of 25 cents and wider than the year-ago loss of 2 cents.

Vintage Petroleum (VPI Quote) stated second-quarter earnings of 72 cents a share, besting the 17-analyst estimate of 68 cents and the year-ago 9-cent result.

XL Capital (XL Quote) posted second-quarter earnings of $1.08 a share, in line with the 11-analyst estimate, but down from the year-ago $1.13.

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Offerings and stock actions

Amerigroup said it was indefinitely delaying its IPO due to unfavorable market conditions.

Corporate Executive Board(EXBD Quote) set a 2-for-1 stock split.

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After Wednesday's Close

Immunex (IMNX Quote) said it plans to issue up to 70 million new shares of its stock and said American Home Products (AHP Quote), now the majority owner of the biotech company, will see its ownership stake fall. Banc of America raised its price target to 65 from 51.

Large Scale Biology(LSBC Quote) was trading up 8, or about 47%, to 25 in its trading debut. The IPO of 5 million shares was priced at $17 after its original price range of $20 to $22 was lowered to $12 to $14. The number of shares offered was also raised twice after starting at an offering of 3.5 million.

Saturn Electronics cut its IPO to 7.2 million shares in a range of $8 to $10 a share from 12 million shares at $10 to $12 a share. It's been approved to trade on the New York Stock Exchange under the symbol "SN."

Sears (S Quote) said its board approved a plan to buy back up to $1.9 billion of its common shares. CEO Arthur Martinez said the company is pleased with the health of the economy and its strong cash flow capabilities.

Sylvan(SLVN Quote) said it will buy back up to 6 million common shares, or 14.3%, of its outstanding shares for between $13.50 and $15 a share in a "Dutch auction" tender offer. In such an auction, successful bidders pay the price of the lowest bid the seller is willing to accept within a set range. The company was lately trading up 9/16 to 14 3/16.

Also, the company announced that it named Neal Cohen its chief financial officer.

Tennant(TANT Quote) raised its quarterly payout 5% to 20 cents a share from its previous quarterly rate of 19 cents a share.

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Analyst actions

The drug sector saw a flurry of activity this morning as a number of analysts came out with comments on a number of stocks in the wake of Eli Lilly's (LLY Quote) early loss of patent protection for its blockbuster antidepressant drug Prozac. Credit Suisse First Boston cut estimates on Lilly with 2001 earnings-per-share estimates lowered to $2.84 from $3.05 and 2002 EPS views to $3.15 from $3.59.

ABN Amro cut the stock to hold from outperform. Lehman Brothers cut Lilly's price target to 100 from 130 but maintained a buy rating on the stock. Meanwhile Morgan Stanley Dean Witter raised Lilly to outperform from neutral.

Sepracor(SEPR Quote), which has a licensing pact with Eli Lilly to develop and sell a variation of Prozac, was cut to buy from strong buy at Deutsche Banc Alex. Brown and its price target was cut to 115 from 136 at Lehman Brothers. Meanwhile Banc of America lifted the stock to buy from market perform.

Elsewhere in the drug sector, ABN Amro raised its rating on

Bristol-Meyers Squibb (BMY Quote) to buy from hold .

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Diamond Offshore (DO Quote) was raised to top pick from buy at Donaldson Lufkin & Jenrette. Meanwhile, DLJ cut Baker Hughes (BHI Quote) to buy from top pick.

Upgrades

Anchor Gaming (SLOT Quote): price target UP to 83 from 78 at Lehman.

Barr Laboratories (BRL Quote): price target UP to 100 at UBS Warburg.

Biogen (BGEN Quote): UP to buy from hold at CSFB.

Dal-Tile (DTL Quote): UP to buy from hold at UBS Warburg.

Met Life (MET Quote): price target UP to 27 from 23 at UBS Warburg.

Polo Ralph Lauren (RL Quote): 2002 EPS UP to $1.95 from $1.85 at CSFB; price target UP to 24 from 18.

Downgrades

Forest Labs (FRX Quote): UP to strong buy from accumulate at Prudential Securities; price target down to 100 from 115 at UBS Warburg.

ICG Communications(ICGX Quote): DOWN to market perform from buy at DLJ.

QXL.com(QXLC Quote): DOWN to underperform from buy at Chase Hambrecht & Quist.

Six Flags(PKS Quote) was cut from Goldman Sachs' recommended for purchase list.

Wal-Mart(WMT Quote): price target DOWN to 60 at UBS Warburg.

Initiations

Apex Silver Mines (SIL Quote): NEW buy at CSFB price target: 18.

Cemex (CX Quote): NEW buy at DLJ.

Dana (DCN Quote): NEW market performer at Goldman Sachs.

Imsa (IMY Quote): NEW market perform at DLJ.

The Midland Company (MLAN Quote): NEW buy at CSFB price target: 38.

Polycom(PLCM Quote): NEW accumulate at Prudential Securities.

RealNetworks (RNWK Quote): NEW buy at ING Barings; price target: 57.

Synovus Financial (SNV Quote): NEW market performer at Goldman Sachs.

Telecorp(TLCP Quote): NEW strong buy at Prudential Securities.

Vitro(VTO Quote): NEW market perform at DLJ.

Group Moves

UBS Warburg initiated coverage of U.S. auto parts companies:

• Borg & Warner Automotive (BWA Quote): NEW buy; price target: 48.

• Delphi (DPH Quote): NEW strong buy; price target: 23.

• Johnson Controls (JCI Quote): NEW buy; two month price target: 68.

• Visteon (VC Quote): NEW buy; price target: 21.

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Miscellany

America Online (AOL Quote) will take down a new Internet search engine that had allowed users to find music files online in the MP3 format, The Wall Street Journal reported.

AMR's(AMR Quote) American Airlines announced it will pay $1.7 million to 99 people with disabilities who were denied jobs at facilities in Nashville, Tenn., and Detroit, Reuters reported the Labor Department as saying.

Interspeed (ISPD Quote) announced that it won a five-year $100 million contract to supply high-speed telecommunications equipment to Australian network-services developer Intelligent Public Network.

Nova Chemicals (NCX Quote)announced that it would increase its stock buy-back program to repurchase between $5 million and $8 million worth of shares, pending regulatory approval.

Pfizer's(PFE Quote) chairman and CEO William Steere Jr. said he's retiring at the end of this year and that Henry McKinnell, Pfizer's president and COO, will replace him. Steere, who's been with the company for 40 years, said he'll remain chairman until Pfizer's annual meeting April 1, 2001.

U.S. utility company Southern Energy (SO Quote) said it would block a German rival's attempt to transfer its stake in Berlin power supplier Bewag, which it had been in talks to buy. The German utility firm announced Wednesday that it was transferring its 49% holdings in Bewag to another German utility as part of a wider stock swap.

Tricon Global's (YUM Quote) KFC unit is voluntarily recalling 425,000 Tangled Treeples toys included with its kids' meals.

Verizon(VZ Quote) is growing closer to settling the strike with its workers, the telephone company said. Progress has been made in negotiations to end the five-day standoff. The Communications Workers of America is fighting for an easier opportunity to organize workers in Verizon's non-unionized wireless unit, the carrier's fastest-growing business.

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After Wednesday's CloseEnergy holding company AGL Resources (ATG Quote) reported that its chairman and CEO Walter Higgins resigned to take over the top job at Sierra Pacific Resources (SRP Quote).

Mexico's antitrust body, the Federal Competition Commission, said it had found indications of monopolistic practices by global beverage giant Coca-Cola (KO Quote). The commission launched a preliminary probe into exclusivity contracts by Coca-Cola following a formal complaint from its main competitor Pepsi (PEP Quote).

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Microsoft (MSFT Quote) said it promoted several executives to lead its new "dot-NET" Internet project, creating a group that will oversee efforts to strengthen the company's focus on Web-based services. The executive reorganization marks the company's third reshuffling in 18 months, according to The Wall Street Journal.

High-end coffee house chain Starbucks (SBUX Quote) announced that it has raised prices on its drip coffee, espresso and blended beverages by about 7 cents a cup at its 2,800 U.S. and Canadian locations. The increase, according to Starbucks, will help offset rising operational costs, including rent and wages.

Thomas & Betts(TNB Quote), an electrical component manufacturer, announced that Chairman and CEO Clyde Moore has stepped down. The company named T. Kevin Dunnigan as his successor.

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