In a research report titled "You've Got Upside," Merrill Lynch's Internet and media research staff offers up a bullish note on the proposed get-together of America Online (AOL) and Time Warner (TWX) .
Since the deal was announced, both of the stocks have been under steady pressure. Merrill has served as an underwriter for both companies, according to a footnote on the research report.
Merrill maintained its intermediate and long-term buy ratings and it reinstated coverage of Time Warner with buy ratings both intermediate and long-term. "We believe the combined company is well positioned to benefit from the ongoing impact of the Internet on the global media industries," Merrill said in the report. "We regard the stock as a core holding if for no other reason than this."
"We continue to believe the merger will prove a strong combination, one that increases the value of both companies and facilitates 1) operating synergies, 2) the transformation of existing businesses, and 3) the launch of new businesses. In an industry evolving this quickly, we believe competitive positioning and brand ownership are more important drivers of stock performance than precise valuation analyses."
Merrill said that considering that, where AOL is currently trading the stock "appears undervalued by almost any measure." Merrill has a 12 to 18 month price target on AOL of 90. The firm said it doesn't "see much downside risk at current levels." AOL closed yesterday at 49 5/8. AOL popped 7 1/2, or 15.11%, to 57 1/8, while Time Warner jumped 7 15/16, or 10.8%, to 81 1/2.
of France lost 4, or 8.4%, to 43 3/4 after it said it is
of Canada in a stock swap valued at $7.1 billion. Newbridge closed down 1 9/16 to 32 13/16. Under terms of the deal, Newbridge shareholders will receive 0.81 share of Alcatel ADRs, or $38.98125 a share.
Mergers, acquisitions and joint ventures
lost 2 13/16, or 6%, to 44 after it said it is buying
for $20.13 a share in stock, or $1.6 billion. PairGain rose 1 7/16, or 9%, to 17 1/2.
ADC is a supplier of network equipment, software and integration services for broadband networks. PairGain is a designer, manufacturer, marketer and seller of digital-subscriber-line networking systems. ADC expects the buyout to be nondilutive to earnings for the balance of fiscal year 2000 and 5 cents accretive in fiscal year 2001.
AT&T Latin America
, a division of
, said it would buy Argentina-based
, a new local phone company. AT&T Latin America would purchase all the share of closely held Keytech from
. AT&T rose 1/2 to 46 7/8.
Separately, AT&T said it agreed to a deal with
to sell combined telephone and TV service packages to customers in New York, New Jersey and Connecticut. AT&T said the companies would offer cable channels and Internet services. The agreement saves AT&T from buying Cablevision, but doesn't give AT&T direct use of Cablevision's wires to transmit its services in order to bypass local telephone company's networks. Cablevision rose 13/16 to 69 11/16.
gained 3 13/16, or 16.4%, to 27 1/16 after it said that Nortel and
would each make a $35 million equity investment in the company and establish a trading network for small and midsized businesses called
Concur Business Advantage
. Safeco lost 13/32 to 20 9/16.
gained 1 7/16 to 41 13/16 after it offered to buy
for $17 a share. Mirage jumped 3 5/8, or 33.3%, to 14 1/2.
In a letter to Steve Wynn, chief of Mirage, MGM Grand Chairman J. Terrence Lanni said that Mirage shareholders can either receive the $17 in all cash or a combination of $7 in cash and MGM Grand stock valued at $10 a share, based on MGM Grand's closing price of 40 3/8 yesterday. The $17 a share offer is a nice premium over Mirage's close of 10 7/8 yesterday.
slipped 9/16 to 128 3/8 after it said
bought an equity interest in the company. Motorola gained 4 to 160 3/4. The investment was part of 724 Solutions' IPO in January.
Earnings/revenue reports and previews
Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified. New highs and lows on a closing basis unless otherwise specified.
lost 5/8 to 15 1/8 after it posted fourth-quarter operating earnings of 64 cents a share, beating the 12-analyst estimate of 57 cents but down from the year-ago 89 cents.
slipped 1/16 to 12 1/2 after it reported fourth-quarter earnings of $1.06 a share, which includes a loss from its
venture. Due to the loss, the report is in line with the year-ago earnings but beats the 15-analyst estimate of $1.03 a share, which reflects the effect of the venture.
Federated Department Stores
lost 13/16 to 34 3/16 despite reporting fourth-quarter earnings of $2.04 a share, beating the 18-analyst estimate of $1.99 and up from the year-ago $1.88 a share.
popped 10 7/16, or 18.3%, to 67 5/8 after it said it plans to hit $30 billion in sales by 2004 through products other than PCs. The company said it expects non-system, or non-PC sales to reach 40% by year end, which is 10% higher than its initial target. Separately, Gateway entered a deal with
to offer big-business customers computers and Web-based computer solutions. Sun rose 6 5/8, or 7.5%, to 94 5/8.
inched up 1/4 to 40 11/16 after it posted a third-quarter loss of 7 cents a share, narrower than the six-analyst estimate of a 17-cent loss but wider than the year-ago report of a 3-cent loss.
gained 15/16 to 34 15/16 after it posted fourth-quarter earnings of 85 cents a share, beating the 13-analyst estimate and up from the year-ago 73 cents.
, in response to inquiries, said "there are no corporate developments to account for the recent drop" in its stock price. Also, the company anticipates it will "meet or exceed" consensus analyst estimates for the third quarter and full fiscal year ending May 31.
Scholastic said, according to
, estimates range from earnings of 6 cents to 7 cents a share for the third quarter, while for the full fiscal year the estimates range $3.05 to $3.08 a share. The full fiscal year estimates exclude a pretax nonrecurring charge that was recorded in the second quarter. The five-analyst consensus estimate calls for the company to earn 6 cents a share for the third quarter and $3.06 for the full fiscal year.
On Jan. 18, Scholastic closed at 69 3/4. Today, the stock finished up 1/2 to 50 1/2.
lost 2 1/4, or 5.3%, to 39 7/8 after it reported fourth-quarter earnings of 63 cents a share, a penny better than the 17-analyst estimate and up from the year-ago 51 cents.
Offerings and stock actions
gained 9/16 to 62 1/4 after it set a 50 million-share repurchasing program.
lost 7/8 to 33 1/16 after it set a share repurchasing program for up to 10 million shares.
gained 1 3/8, or 6.4%, to 23 after it said it will repurchase up to $10 million of its shares.
soared 26 15/16, or 12%, to 252 after it set a 2 million-share offering for institutional investors at $211 a share. The offering could raise $422 million.
The 23.5 million-share IPO of
jumped 10 1/8, or 50.6%, to 30 1/8 after it was priced at $20 a share, the top of the $18-$20 range.
Donaldson Lufkin & Jenrette
are the lead underwriters. Nextel Partners is an affiliate of
, offering digital wireless communications services in small and midsized markets.
lifted 5, or 9.1%, to 59 3/4 after it raised its share repurchase program to 8 million from 4 million.
added 11/16 to 24 13/16 after it said it set a $150 million stock buyback.
gained 5/16 to 59 13/16 after said it authorized a 10 million-share repurchase program. Textron said the buyback reflects confidence in strong 2000 results.
lost 1 5/8 to 50 after it set a repurchasing plan for up to 12 million shares.
tacked on 5, or 13.2%, to 47 after it priced a 1.5 million-share secondary offering at $41.75 a share.
Deutsche Banc Alex. Brown
initiated coverage of
-- a provider of specialized contract pharmacy and related services pursuant to agreements with biotech manufacturers -- with a buy rating and a 30 price target. Accredo Health slid 1/8 to 26 1/8.
Merrill Lynch raised its rating on
to buy from accumulate. Arrow Electronics popped 1 15/16, or 9.2%, to 23.
with a buy rating and set a price target of 28. Advanced Paradigm edged up 7/8 to 24.
Merrill Lynch sliced its intermediate-term rating on
to accumulate from buy. Baltimore Technology plummeted 27 3/8, or 12.5%, to 191 5/8.
Credit Suisse First Boston
boosted software and programming manufacturer
raised its fiscal 2001 earnings target to 33 cents from 31 cents and price target to 170 from a split-adjusted 76. BEA Systems lifted 1 1/8 to 139.
Donaldson Lufkin & Jenrette
to market perform from buy. Consolidated Papers gained 3/4 to 36 3/4.
Merrill Lynch launched coverage of online auctioneer
with a buy rating. eBay soared 20 7/16, or 15.2%, to 154 15/16.
initiated coverage of
with a buy rating and a 50 price target. Express Scripts bounced 2 1/8, or 5.1%, to 43 11/16.
Salomon Smith Barney
upped its price target on
to 60 from 30. Focal Communications lifted 1 5/8 to 46 1/8.
-- a global producer of high-tech solutions in the fields of electronics, telecommunications, metal processing, automotive components and optics -- near-term rating to buy from accumulate. Kyocera climbed 8 to 175.
SG Cowen initiated coverage of Internet advertiser
as a strong buy with a near-term price target of 37. L90 sank 2, or 8%, to 22 7/8.
Credit Suisse First Boston
raised its earnings estimates on
National Discount Brokers
. The firm upped its fourth-quarter EPS to 16 cents a share from 12 cents and raised its fiscal 2000 estimate to 58 cents share from 43 cents, while taking its fiscal 2001 estimate to $1.14 a share from 97 cents. National Discount Brokers tacked on 1/16 to 22 9/16.
CSFB rolled out coverage of
Protein Design Labs
with a buy rating and a price target of 222. Protein Labs jumped 21 11/16, or 11.6%, to 207 25/32.
Merrill Lynch rolled out coverage of
with an intermediate accumulate, long-term buy rating. Regeneration advanced 15 3/4, or 75.4%, to 36 5/8.
lowered its price target for
-- a manufacturer of laser systems and related products to correct vision disorders -- to 18 from 25. Summit Technology slipped 4 1/4, or 35.2%, to 7 13/16.
to its recommended list from market outperformer. Tiffany lifted 2 19/32 to 59 5/16.
upped its rating on
-- a manufacturer of foods, detergents and other personal products -- to buy from hold. Unilever declined 1/16 to 25 11/16.
Lehman Brothers downgraded
-- another manufacturer of vision-improving laser technology -- to neutral from buy. Visx sank 5 9/16, or 25.4%, to 16 5/16.
Merrill Lynch upped its fiscal 2000 EPS estimate on
to $1.46 from $1.45 a share. Wal-Mart shed 3/4 to 47 3/8.
CSFB raised its priced target on
to 65 from 38. Williams Communications tacked on 1/8 to 41 3/4.
declined 7 7/16, or 19.5%, to 30 9/16 after it said it would shut down its Marlton, N.J., plant, reducing its workforce by 300 jobs. The company said it would move its pharmaceuticals business to South Carolina, giving its employees of its
division the option to transfer. Fluor has laid off 5,000 employees since it began restructuring in March.
was up over 20% today following the
story written yesterday by
Cory Johnson wherein company officials outlined about their future plans. Odetics advanced 3 5/8, or 16.1%, to 26 1/8.
Oil ministers from
members Saudi Arabia, Kuwait, United Arab Emirates and Qatar, along with non-OPEC nations Bahrain and Oman, ended a day of talks in Saudi Arabia with a vow to work toward a stable balanced market that would avoid damaging the world economy,
lost 3/8 to 15 3/4 after it named William Trubeck CFO.
The Heard on the Street column in
The Wall Street Journal
said that stocks going into the four trusts
has sold so far, totaling $2.4 billion, have had a big run-up in the day before the HOLDRs begin trading. The jump occurred because Merrill has to buy all the shares for a HOLDRs trust the day before it is formed.
The column also notes that the shares are sold to the trust at their closing prices, sometimes as much as 5% to 10% higher than where they began trading that day. Merrill discloses which stocks will be included in the trust and their weightings in prospectuses for the trusts filed with the
Securities and Exchange Commission
weeks before the trusts start trading, the column says. Merrill Lynch mounted 5 7/8, or 6.7%, to 93 1/2.