|
|
Enron Mail |
<<MF September 6th 2001.pdf<<
Good Thursday Morning - Comments From The Local Guys! This morning, the non-manufacturing National Association of Purchasing Managers (NAPM) unexpectedly fell to 45.5 in August from 48.9 in July. New Orders fell to 45.9 from 48.6 (note that this component is not seasonally adjusted). The services that reported the most negative environment, according to this survey, were: communications, real estate and construction. Blending these data with the manufacturing NAPM, the total economy NAPM dropped to 46.0 from 47.8 in July. Tomorrow the Labor Department releases the employment data for August. Lehman Brothers expects a payroll gain of 28,000 new jobs in the non-farm sector. The 30 -year bond yield is 5.40%. The 10-year is trading at 4.85%. The 5-year is trading at 4.40%. Spot crude oil is trading at $27.57 p/b. Natural Gas - Henry Hub - is trading at $2.44 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 IMPACT CALLS Yahoo!, Inc(YHOO) 2 - Buy H. Becker, .212.526.1764 Buy On the Pullback! (C) OLD NEW STREET P/E Price: $10.64 EPS 2000 N/A $0.48 N/A N/A 52 Wk Ra: $119.25 - 10.64 EPS 2001 $0.03E $0.03E $0.05E 354.7 Mkt Cap: $6.3B EPS 2002 $0.10E $0.10E $0.13E 106.4 FY: 12/31 Price Target $20 $20 Rank 2 2 *Yahoo!'s stock has been extremely weak, down 40% in the past month, and trading at a 52-week low of $10.64. We view this pullback as a compelling buying opportunity. *Much of this decline is attributable to widespread speculation that Yahoo! will not hit its 3Q estimates due to the eroding advertising outlook. *After carefully analyzing our forecast, we believe that a significant shortfall is unlikely: Our 3Q estimates already factor in the dot-com meltdown and the prolonged weak economy. *We recognize that Yahoo!s challenges are formidable and a re-acceleration in growth may be a few quarters off. However, we believe that estimates are low enough and that the valuation has become much more reasonable. *We believe that the downside on the stock is limited and underpinned by the potential sale of the company. Cable Communications Services L. Warner, .202.452.4705 Cox & Comcast Terminate @Home Relationship *We believe that Cox's and Comcast's decision to end their relationships with Excite@Home will be very positive in the long term for both companies. However, we believe that the transition of service from At Home's infrastructure to a new infrastructure poses execution risk in the first half of 2002. *Cox and Comcast notified Excite@Home that they will terminate their respective agreements with the company effective June 4, 2002. This means that Cox and Comcast must migrate their high speed data customers from the ATHM platform to new platforms in the first half of next year, a major undertaking. *We have revised our forcasts for both companies to reflect, relative to previous estimates; higher revenue in 2002 and 2003, higher OCF in 2003, lower HSD net adds in 1H02, and higher capex in 2002. Major Pharmaceuticals C. Butler, .212.526.4410 Maybe You Did Not Hear..Drugs Might Work in Q4! *The US Pharma sector is trading at a 12 percent premium to the S&P. Historically this is less than the 27 percent premium of the past several years. We provide comments on our perception of several catalysts that may drive the drug index through the end of this year. *The first catalyst may come next week. Lilly's Xigris for sepsis will be before the FDA on September 12. We anticipate approval and a subsequent Q4 launch. *Bristol Myers will highlight data on their new hypertensive drug Vanlev later this month or early next. Five key analyst/investor meetings will transpire between October and December for LLY, BMY, PHA, MRK, and PFE. SGP will host an ADAM meeting in October. *With a weaker dollar, Q4 looks strong for revenue acceleration as the S&P earnings are being pressured. IDEC Pharmaceuticals(IDPH) 2 - Buy M. Wood, .212.526.4035 Preview of Zevalin Panel Meeting (C) OLD NEW STREET P/E Price: $59.27 EPS 2000 N/A $0.30 N/A N/A 52 Wk Ra: $78 - 33 EPS 2001 $0.55E $0.55E $0.57E 107.8 Mkt Cap: $7.5B EPS 2002 $0.80E $0.80E $0.88E 74.1 FY: 12/31 Price Target $75 $75 Rank 2 2 *IDEC's Zevalin will be reviewed by an FDA advisory panel on September 11. *We think the main areas of focus for the panel will be 1) efficacy, with emphasis on the stage of disease at which the product should be used, 2) safety concerns, particularly with regard to hematological toxicity, and 3) the dosing techniques used to administer the drug. *We think the chances of a positive outcome at the panel meeting are 75% or greater. We forecast Zevalin launch early in 2002 and revenues of $70 million in the first year. Semiconductor Capital Equipment E. White, .212.526.4744 3Q EPS Preview -To Preannounce or Not To? *Chipmakers continue to trim capital spending budgets resulting in weak 3Q earnings for semiconductor equipment companies. We think 3Q orders will be lower than 2Q and expect EPS guidance to be revised lower for selected companies. This could limit near-term upside potential in equipment shares. *Many companies could face an uphill battle to meet 3Q expectations. Those whose earnings may be more at risk than others include ACLS, ASYT, CYMI, EGLS, FSII, LRCX, LTXX, PRIA, PHTN, TER, TWAV and VSEA. *In summary, we see a high likelihood of multiple earnings preannouncements over the coming weeks. We also believe that many of the companies mentioned above could set lower expectations in 4Q than consensus estimates currently reflect. INITIATING COVERAGE Ameren Corp(AEE) 3 - Market Perform D. Ford, .212.526.0836 Big Yield Utility OLD NEW STREET P/E Price: $41.50 EPS 2000 N/A $3.45 N/A N/A 52 Wk Ra: $47 - 37 EPS 2001 N/A $3.30E $3.36E 12.6 Mkt Cap: $5.7B EPS 2002 N/A $3.30E $3.46E 12.6 FY: 12/31 Price Target N/A $41 Rank N 3 *We are initiating coverage of Ameren with a 3-Market Perform rating. While the Missouri rate case overhang could last into next year, AEE's 6.12% yield should hold price firm. *In addition to a good yield, other AEE positives are: 1) A track record for delivering on earnings promises; 2) A well-run utility; and 3) Attractive geography for competing in unregulated energy markets. *Our $3.30 2002 EPS estimate incorporates a "middle of the road" Missouri rate case outcome in early Spring. We assume a $130M P-T rate cut (-$0.46/share) and an 11% ROE. *AEE's Illinois/Missouri location favorably positions it with nearly 25 adjacent utility trading partners. *Our $41 target is 12.5x our 2002E. AEE's above-average yield (6.1% vs. 4.1% for utilities and 1.4% for the S%P 500) and good operations should provide support despite rate case overhang. International Rectifier(IRF) 3 - Market Perform D. Niles, .415.274.5252 A Pure-Play in Power Semis OLD NEW STREET P/E Price: $35.33 EPS 2001 N/A $2.30 N/A N/A 52 Wk Ra: $70 - 27 EPS 2002 N/A $1.13E $1.20E 31.3 Mkt Cap: $2.2B EPS 2003 N/A $2.09E $2.31E 16.9 FY: 6/30 Price Target N/A N/A Rank N 3 *Recognized as one of the oldest, dedicated pure-plays in power semis, IRF is capitalizing on the emerging growth opportunities in power mgnt which should lead to above average growth once the semiconductor industry recovers. *Dataquest estimates that 70% of the world's power MOSFETs are produced by IRF or use its patented technology. The leadership position in power components provides IRF with a platform to leverage expansion into high margin power systems businesses. *At 2.2x LTM P/S, we believe IRF represents a compelling valuation relative to its peers given opportunity for margin expansion. However, we are cautious near-term given lack of evidence into a sustained recover in the broader semiconductor market. *We initiate coverage on IRF with a 3-MP rating on a leader in power semiconductors. COMPANY/INDUSTRY UPDATES Mortgage Finance B. Harting, .212.526.3007 Historical Performance Indicates Futher Upside *We have gone back in time, relating historic stock performance of our sector following an easing cycle, defined as three consecutive rate decreases. Historically, the group has continued to show strong performance after the last rate cut into a period of rate increases. The result has been an outperformance of the S&P 500 coming out of three of the last four interest rate cuts. Wells Fargo(WFC) 1 - Strong Buy H. Dickson, .212.526.5659 Residential Real Estate Update (A) OLD NEW STREET P/E Price: $46.47 EPS 2000 N/A $2.53 N/A N/A 52 Wk Ra: $56 - 40 EPS 2001 $2.10E $2.10E $2.06E 22.1 Mkt Cap: $79.7B EPS 2002 $3.20E $3.20E $3.13E 14.5 FY: 12/31 Price Target $65 $65 Rank 1 1 *The LEH economic opinion is that the real estate market is not just a bubble waiting to burst, and much of the doom and gloom in the market may be overblown. Based on this opinion, we believe that a company such as WFC may have upside potential when the unfounded fears in the market are lifted. We continue to rate WFC 1 - Strong Buy. *To the extent that this view is correct, WFC should benefit from stronger revenue growth in the mortgage and home equity businesses. This should help to offset businesses that may have weaker growth. *The company should also be positioned to positively benefit from the cross-sell opportunities which come with mortgage and home equity sales. *WFC may be a good valuation play as the stock currently may have the market's negative predictions for the real estate market built in. Greater Bay Bancorp(GBBK) 2 - Buy B. Vandervliet, .212.526.8893 Residential Trends: Reason For Continued Caution (C) OLD NEW STREET P/E Price: $26.22 EPS 2000 N/A $1.62 N/A N/A 52 Wk Ra: $44 - 20 EPS 2001 $1.89E $1.89E $1.92E 13.9 Mkt Cap: $1.1B EPS 2002 $2.15E $2.15E $2.19E 12.2 FY: 12/31 Price Target $30 $30 Rank 2 2 *While we do not believe given the low weighting of residential exposure that credit quality in this area should be a primary concern among investors, we believe on balance it is reason for continued caution. *Given the low concentration of residential lending exposure at GBBK, just 6% of the portfolio, this is not our area of primary concern. *Our concern is focused on the 47% concentration of commercial real estate and construction loans in the portfolio which we believe may be under greater pressure in the intermediate term. *Most recently we highlighted credit trends at GBBK in a note dated 8/14 entitled "More Real Estate Data, More Caution." David C. Morris Sr. VP Lehman Brothers 713-652-7112/800-227-4537 dcmorris@lehman.com 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 securities. 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 = Strong Buy (expected to outperform the market by 15 or more percentage points); 2=Buy (expected to outperform the market by 5-15 percentage points); 3=Market Perform (expected to perform in line with the market, plus or minus 5 percentage points); 4=Market Underperform (expected to underperform the market by 5-15 percentage points); 5=Sell (expected to underperform the market by 15 or more percentage points). This document is for information purposes only. We do not represent that this information is complete or accurate. All opinions are subject to change. 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. ------------------------------------------------------------------------------ This message is intended only for the personal and confidential use of the designated recipient(s) named above. If you are not the intended recipient of this message you are hereby notified that any review, dissemination, distribution or copying of this message is strictly prohibited. This communication is for information purposes only and should not be regarded as an offer to sell or as a solicitation of an offer to buy any financial product, an official confirmation of any transaction, or as an official statement of Lehman Brothers. Email transmission cannot be guaranteed to be secure or error-free. Therefore, we do not represent that this information is complete or accurate and it should not be relied upon as such. All information is subject to change without notice. - MF September 6th 2001.pdf
|