Stocks to Watch: Retail, BFO, UN, KO, AOL, LU
As TheStreet.com first reported late yesterday, Goldman Sachs analysts downgraded the retail sector after yesterday's close. Among the stocks downgraded to either market outperformer or market performer from buy were Costco (COST) - Get Report, Kohl's (KSS) - Get Report, Target (TGT) - Get Report, Tiffany (TIF) - Get Report, Federated (FD) , Abercrombie & Fitch (ANF) - Get Report, Wal-Mart (WMT) - Get Report, May (MAY) , Ross (ROST) - Get Report, TJX (TJX) - Get Report, Tuesday Morning (TUES) - Get Report and Neiman Marcus (NMG.A) .
The sector has been under pressure all year due to fears of higher interest rates and increasingly difficult
same-store sales comparisons.
Donaldson Lufkin & Jenrette
disagreed with its competitor's macro downgrade of the sector and said that if retail stock takes a hit from the call, investors should "give it an hour and buy." DLJ said it likes
Circuit City
(CC) - Get Report
,
Best Buy
(BBY) - Get Report
and
Staples
(SPLS)
. Circuit City fell 1 9/16 to 58 38; Best Buy dropped 4 9/16, or 5.5%, to 78 1/4; Staples slipped 15/16 to 18 1/16.
Bestfoods
(BFO) - Get Report
, which makes products such as Hellmann's mayonnaise and Skippy peanut butter, said
Unilever
(UN) - Get Report
made an unsolicited bid to buy it for $18.41 billion in cash. Bestfoods said it rejected the offer as financially inadequate and not in the best interests of its shareholders. Unilever, an Anglo-Dutch consumer products giant, offered to pay $66 a share for Bestfoods.
Meanwhile, Unilever is seeking a $20 billion syndicated loan to back its bid for Bestfoods, U.S banking sources told Reuters. Participating banks include
ABN-Amro Banks
,
Deutsche Bank
and
UBS Warburg
. Banking sources also said that the size of the loan would allow Unilever to raise its bid.
Mergers, acquisitions and joint ventures
Integrated aluminum company
Alcoa
(AA) - Get Report
announced that it has completed acquisition of
Reynolds Metals
(RLM) - Get Report
following approval by the U.S. Department of Justice and the European Union. Under the deal, each Reynolds share was converted into 1.06 shares of Alcoa common stock. Alcoa must make divest some of Reynolds' assets according to the terms of agreements with the Department of Justice and the European Union.
Coca-Cola
(KO) - Get Report
and
America Online
(AOL)
said that they have entered into a two-year marketing agreement valued at roughly $64 million,
The Wall Street Journal
reported.
Lucent Technologies
(LU)
said it was considering a sale of its power systems unit. The tech giant said it would select a buyer within six months.
--
Tara Murphy and Diane Gross
Earnings/revenue reports and previews
(
Earnings estimates from First Call/Thomson Financial, earnings reported on a diluted basis unless otherwise specified.
)
It's a good thing --
Martha Stewart Living Omnimedia
(MSO)
posted first- quarter earnings of 11 cents a share, beating the 6-analyst estimate of 4 cents a share and up from the year-ago 7 cents a share. Total revenues increased 30% to $69.1 million, as compared to $53.4 million in 1999. Martha Stewart, the company's chairman and chief executive, attributed the revenue growth in part to a double-digit increase in circulation revenues, increased syndication of the second half-hour of the daily show and higher traffic on and strong sales from its Web site. Registered users increased 73% to 1.28 million over the comparable quarter of 1999.
Coventry Health Care
(CVTY)
reported first-quarter earnings of 18 cents a share, in line with the 13-analyst estimate and up from same time last year's 14 cents. Allen Wise, president and chief executive, said excluding the Principal Life fee income, revenues for the quarter were up 19% and net earnings were up 220% compared to first quarter 1999.
DaimlerChrysler
(DCX)
said that its fiscal 2000 revenue would beat out its forecast of $137.6 billion. The automaker attributed the outlook to increased demand for its
Mercedes-Benz
cars.
eToys
(ETYS)
announced that it intends to control its marketing and distribution costs and improve margins as "keys to profitability." Beginning in fiscal 2001, eToys said it expects gross profits to exceed these expenses.
ILEX Oncology
(ILXO)
posted a first-quarter loss of 15 cents a share, narrower than both the 6-analyst estimate of an 18-cent loss and the year-ago report of a 36-cent loss. The company said its revenues grew 94% to $6.6 million fueled by a higher-than-expected increase in contract research services revenue.
Intimate Brands
(IBI)
posted a 21% increase in April same-store sales.
Manor Care
(HCR) - Get Report
posted first-quarter earnings of 20 cents a share, missing the 12-analyst estimate of 27 cents a share and down from the year-ago 37 cents. Manor Care's board also said it would not put the company on the auctioning block.
Novell
(NOVL)
said it will fall short of First Call/Thomson Financial estimates of 16 cents a share with a "significantly lower-than-anticipated" 8 cents a share. The software maker pegged its problems on a sales shakeup,
Microsoft's
(MSFT) - Get Report
Windows 2000 release and the growing strength of the Linux movement. Novell said it expects to post just over $300 million in revenue, including $35 million from a royalty payment made by Linux distributor
Caldera
(CALD)
.
PaineWebber sliced its price target on Novell to 15 from 27, while Goldman Sachs cut its fiscal 2000 EPS estimate to 44 cents from 70 cents.
Revlon
(REV) - Get Report
reported a first-quarter loss of 48 cents a share, before business consolidation costs and a gain on the sale of the company's worldwide professional products line, beating the 4-analyst estimate by a penny and up from the year-ago 67-cent loss.
Starwood Hotels & Resorts
(HOT)
posted first-quarter earnings of 26 cents a share, a penny better than the 15-analyst estimate and up from the year-ago 20 cents a share. The hotel and leisure company, which, through its subsidiaries, operates the Sheraton, Westin, St. Regis, Luxury Collection, Four Points and W brands, saw total revenues increase 18% to $1 billion.
Wesley Jessen VisionCare
(WJCO)
posted first-quarter earnings of 44 cents, a penny better than the one-analyst estimate and up from the year-ago 34 cents a share.
Williams
(WMB) - Get Report
posted first-quarter earnings of 27 cents a share, before the cumulative effect of a change in an accounting principle. The year-ago report was a 13-cent profit. The 14-analyst estimate expected the company to post earnings of 16 cents.
--
Tara Murphy and Diane Gross
Offerings and stock actions
EMC
(EMC)
announced a two-for-one stock split, in the form of a 100% stock dividend, payable June 2.
Kulicke & Soffa
(KLIC) - Get Report
said that its chairman and CEO C. Scott Kulicke will sell about 250,000 shares of the company's stock that he holds. The semiconductor assembly equipment supplier said Kulicke's sale is an effort to diversify his assets. If he sold all 250,000 shares, Kulicke would still hold 275,000 common shares, which doesn't include his stock options.
--
Tara Murphy and Diane Gross
Analyst actions
Upgrades
Bestfoods
(BFO) - Get Report
: UP to buy from market perform at
Donaldson Lufkin & Jenrette
, price target: 75.
Sanmina
(SANM) - Get Report
: UP to top pick from buy at DLJ.
Transocean Sedco
(RIG) - Get Report
: UP to buy from hold at
UBS Warburg
, price target: 70.
Downgrades
AT&T
(T) - Get Report
: DOWN to market perform from buy at
Donaldson Lufkin & Jenrette
.
Cigna
(CI) - Get Report
: price target DOWN to 100 from 115.
General Motors
(GM) - Get Report
: DOWN to outperform from buy at
Lehman Brothers
.
Hilton Hotels
(HLT) - Get Report
: DOWN to attractive from buy at
PaineWebber
.
Robert Half
(RHI) - Get Report
: DOWN to hold from buy at Lehman.
Initiations
Infospace
(INSP) - Get Report
: NEW buy at
Credit Suisse First Boston
.
Luminex
(LMNX) - Get Report
: NEW outperform at
Lehman Brothers
, price target: 26.
Micro Therapeutics
(MTIX)
: NEW strong buy at
US Bancorp Piper Jaffray
.
Opus 360
(OPUS)
: NEW buy at
JP Morgan
, price target: 15.
Scient
(SCNT)
: NEW buy at
Banc of America
, price target: 85.
Uproar
(UPRO) - Get Report
: INITIATED buy at
Salomon Smith Barney
, price target: 40.
Group Moves
J.P. Morgan
initiated coverage of three cellular communications companies:
Lehman Brothers
downgraded four mining companies to underperform from neutral:
- Battle Mountain (BMG)
- Homestake Mining (HM)
- Newmont Mining (NEM) - Get Report
- Kinross Gold (KGC) - Get Report Lehman also sliced its long-term outlook on gold to $270 per once from $280 per once, citing weakening fundamentals.
--
Tara Murphy and Diane Gross
Miscellany
The
Nasdaq Stock Market
is mulling new regulations for dealers trading in premarket activity,
The Wall Street Journal
reported. The latest step considers how premarket trading can hurt investors.
Separately,
The Journal
reported that the Nasdaq will combine its emerging
Nasdaq Europe
operations with
Deutsche Boerse's Neuer Markt
, which focuses on European tech issues. According to a person familiar with the matter, the newly formed market would be branded to incorporate the Nasdaq name. The Nasdaq will probably assume a small equity interest in the market.
Conseco's
(CNC) - Get Report
ex-chairman and CEO Stephen Hilbert walked away with a $72.5 million severance package, according to a
Securities and Exchange Commission
filing, as reported in
The Wall Street Journal
Conseco's shares were off 1/4 to 6 3/8.
Polaroid
(PRD)
shares slid 1/16 to 20 5/16 after it announced the launch of a business-to-business Web site, which will go live June 30. The new site, aimed at improving effectiveness for end users, will offer business and professional users an online experience focusing on delivering real-time imaging solutions and e-commerce through channel providers.
The site is part of a collaboration with
Viant
(VIAN)
, an Internet professional services firm, to develop business strategy and creative design and to implement technology for the site. Viant shares lost 2, or 7.8%, to 23 1/2.
