Enron Mail

To:larimore@enron.com, jordan.larimore@lehman.com
Subject:The Morning Market Call - Monday July 16th, 2001.
Date:Mon, 16 Jul 2001 13:02:48 -0700 (PDT)

<<MF July 16th 2001.pdf<<

Good Monday Morning - Comments From The Local Guys!

Very late edition.

According to Jeff Applegate, Lehman Brothers' strategist, the prevailing
bear story on the market is that the market is now lower than it was six
months ago, after the initial Federal Reserve interest rate cut. The
implication is that something must be wrong. Well, one thing that we do know
is that earnings have been declining for the last six months. However,
according to Jeff, that does not imply that the Fed is powerless. It only
means that memories are short. In 1981, the same situation prevailed. The
market was down 6%, six months after the initial interest rate cuts from the
Fed. and again in 1990, the market was down 14% after the same period.
However, Jeff does point out that on average, the S&P 500 was invariably up
18% after the initial Fed. easing. Given that Jeff's target by year end is
only 1450 on the S&P 500, the jury is still out. If the S&P reached that
level, it would only be 8% above the January 3rd level when the Fed. started
their easing process....and that would be at the low end of the historical

The 30-year US T-Bond yield is 5.87%.
The 10-year is trading at 5.17%.
The 5-year is trading at 4.71%.
Spot crude oil is trading at $26.06 p/b.
Natural Gas - Henry Hub - is trading at $3.06 p/mcf.

AD Time:

New Federal Insider-Trading Rule (Rule 10b5-1) has been adopted by the SEC
under the Securities Exchange Act of 1934. This rule greatly enhances an
insider's/employee's ability to trade his/her corporate shares during
blackout periods.
Previously, without the protection of this new SEC rule, employees and
insiders could safely trade only outside of designated blackout windows.
Under this new rule, insiders/employees may have the ability to purchase and
sell their corporate shares even during blackout periods if a written plan
was established and in force when the insider/employee was not in possession
of material, non-public information.
The new rule contains other restrictions and should be reviewed carefully.
Lehman Brothers has established a turn-key plan that take into account the
regulatory procedures for establishing such a plan. Please email us or
call us for more information.

Lehman's Research


Health Care Distribution & Technology L. Marsh, .212.526.5315
*This morning we a providing a June Quarter EPS Preview for our covered
healthcare Distribution & Technology names - "SUMMER
INSIGHTS", h'lighting three areas of questions to which will get some
insights with June quarter results: a) impact on recent chain
drug store rev. trends on wholesalers; b) update on status of AAS/BBC
merger, and c) justification for current valuation (in line with
longer-term trend-line relative P/E).
*With this preview, we are raising our price target on shares of DKWD after
recent capital raise, going from $37 to $45. We are
maintaining our FY02 EPS est. of $2.45, but are adjusting down our
previously aggressive Q4 est.
*We highlight ant. solid results for most of our group, and look for 19% y/y
drug volume gains, slightly below March #s. 1st to report,
OMI - 7/18

St. Jude Medical(STJ) 2 - Buy D. Gruber, .212.526.1924
Raising Price Target To $72
Price: $64.9 EPS 2000 N/A $1.82 N/A N/A
52 Wk Ra: $66 - 36 EPS 2001 $2.18E $2.21E $2.17E 29.4
Mkt Cap: $5.7B EPS 2002 $2.55E $2.60E $2.52E 25.0
FY: 12/31 Price Target $67 $72
Rank 2 2
*We are raising our price target on St. Jude based on (a) continued strong
fundamentals and (b) the potential for upward earnings
revisions in the 2H01 and 2002E. St. Jude continues to execute as planned.
It is expected to become debt free in late-02 (if not
earlier). Cash flow remains strong. Our revised price target of $72
represents a 27.5x of CY02 of $2.60.
*Adding $0.02 to our 2001 EPS estimate and $0.05 to our 2002 EPS estimate
from elimination of escrow payments. Final FASB rule
change could add an additional $0.17 per year to EPS.
*Incorporation of DAO algorithms into Integrity AFX solidifies #2 position
in pacemakers. Approval 3 5 months ahead of
expectations adds another $0.01 to CY01 EPS estimate.
*Raising price target to $72


Juniper Networks(JNPR) 3 - Market Perform T. Luke, .212.526.4993
Assuming Coverage; Awaiting Better Visibility; Mkt Perf. (C)
Price: $28.47 EPS 2000 N/A $0.53 N/A N/A
52 Wk Ra: $245 - 24 EPS 2001 N/A $0.51E $0.53E 55.8
Mkt Cap: $9.1B EPS 2002 N/A $0.53E $0.71E 53.7
FY: 12/31 Price Target N/A $32
Rank N 3
*We are assuming coverage of core IP routing leader Juniper Networks. While
we are encouraged by JNPR's impressive comp
positioning as a strong tech leader in key l-term growth market, we see few
n-term catalysts for shares w/ visibility limited amidst
current telecom cap ex slowdown. Rating 3 Market Perform
*We believe JNPR remains a core routing tech leader with a world class
product line, over 500 service provider custs, and a strong,
experienced mgmt team operating with high gross margins & good cash flow in
a mkt with high barriers to entry.
*On July 12, JNPR reported 2Q01 results in line w/ recently reduced
guidance. Rev of $202M & EPS of $0.09. GM was 60.2%.
Book to Bill<1.
*Our CY01 & CY02 rev & EPS ests are $944M & $1B & $0.51 & $0.53,
respectively. Against a backdrop of weaker carrier
spending, flattish sales over the next several q's, and heightened
competitive focus f/ CSCO we see few catalysts for shares beyond
$29-$32, or 55-60x CY02 ests.


Hudson City Bancorp(HCBK) 2 - Buy B. Harting, .212.526.3007
Buybacks Drive Upside Surprise (C)
Price: $23.69 EPS 2000 N/A $1.04 N/A N/A
52 Wk Ra: $23 - 16 EPS 2001 $1.21E $1.21E $1.23E 19.6
Mkt Cap: $2.4B EPS 2002 $1.33E $1.33E $1.36E 17.8
FY: 12/31 Price Target $23 $25
Rank 2 2
*Hudson City reported $0.31 for 2Q01, $0.01 ahead of consensus estimates. We
reiterate our 2-Buy rating and our earnings estimates,
at $1.21 for FY 2001 and $1.33 for FY 2002. We also raise our target price
from $23 to $25 per share.
*HCBK reported $0.31, $0.01 ahead of consensus estimates. Operating results
were in-line with expectations; EPS benefited from
higher share repurchase activity than expected. Net interest margin remained
flat sequentially, at 2.81%.
*The quarter was highlighted by balance sheet growth. Due to increases in
both the loan and securities portfolio, HCBK now has total
assets in excess of $10 billion.
*Management continues to manage its expense base. Efficiency ratio for the
quarter was 29.8%, down from 30.9% in the year ago
*HCBK has repurchased nearly $200 million in common stock in 1H01. At
quarter-end, the bank's equity to assets ratio remained in
excess of 14%.

David C. Morris
Sr. VP Lehman Brothers

Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the
past three years a public offering of securities for this company. B-An
employee of Lehman Brothers Inc. is a director of this company. C-Lehman
Brothers Inc. makes a market in the securities of this company. G-The
Lehman Brothers analyst who covers this company also has position in its
Key to Investment Rankings: This is a guide to expected total return (price
performance plus dividend) relative to the total return of the stock's local
market over the next 12 months. 1 = Buy (expected to outperform the market
by 15 or more percentage points); 2=Outperform (expected to outperform
the market by 5-15 percentage points); 3=Neutral (expected to perform in
line with the market, plus or minus 5 percentage points); 4=Underperform
(expected to underperform the market by 5-15 percentage points); 5=Sell
(expected to underperform the market by 15 or more percentage points);
V=Venture (return over multiyear time frame consistent with venture capital;
should only be held in a well-diversified portfolio).
This document is for information purposes only. We do not represent that
this information is complete or accurate. All opinions are subject to
The securities mentioned may not be eligible for sale in some states or
countries. This document has been prepared by Lehman Brothers Inc., Member
SIPC, on behalf of Lehman Brothers International (Europe), which is
regulated by the SFA. ?Lehman Brothers, Inc.

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- MF July 16th 2001.pdf