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|  | FEBRUARY 13, 2004
 S&P STOCK PICKS & PANS S&P Says Buy Analog Devices Also: analysts' opinions on Dell, ImClone and Bristol-Myers Analog Devices (ADI ): Maintains 5 STARS (buy) Analyst: Thomas Smith The chipmaker reported first-quarter fiscal 2004 (Oct.) earnings per share of 30 cents, vs. 16 cents, which is a penny above S&P's estimate. Revenues rose 30% year-to-year and 9% quarter-to-quarter, as semiconductors used for signal processing reached new markets. S&P is raising the earnings per share estimates to $1.45, from $1.40 for fiscal 2004, and to $2.05, from $2.00 for fiscal 2005. Presently trading near 32 times S&P's $1.55 calendar 2004 earnings per share estimate, S&P believes revenue acceleration merits a price-earnings expansion to 35, which would still be below high-end analog peers' p-e of 38. Applying a p-e of 35 to S&P's $2.15 calendar 2005 estimate supports S&P's new 12-month target price of $75, up from $74. Dell (DELL ): Maintains 3 STARS (hold) Analyst: Megan Graham Hackett Dell posted January-quarter earnings per share of 29 cents, vs. 23 cents, in line with S&P's estimate, but earnings per share was aided by about 1 cent from a lower tax rate vs. Revenues rose 18%, to $11.5 billion, matching S&P's model, as server units grew 40% and storage sales rose 47%. However, some of this mix benefit was offset by strength in low-end PCs. The computer maker sees April-quarter revenues of $11.2 billion, and earnings per share of 28 cents, both above S&P's model, as it continues to see steady improvement in demand. S&P is raising the fiscal 2005 (Jan.) estimate by 2 cents, to $1.22. S&P views Dell as fairly valued based on a discounted cash-flow analysis, which yields S&P's 12-month target price of $36. ImClone Systems (IMCL ): Reiterates 5 STARS (buy) Analyst: Frank DiLorenzo The stock was halted Thursday pending a news release from the company. The FDA approved Erbitux to treat advanced colorectal cancer in combination with irinotecan, or alone if patients cannot tolerate irinotecan therapy. S&P sees the news as very positive, and thought the approval would only be for the combination treatment. S&P expects partner Bristol-Myers to aggressively promote the therapy, with ImClone getting a 39% take of U.S. sales and a $250 million cash milestone. S&P sees U.S. Erbitux sales of $138 million in 2004 and $279 million in 2005. Bristol-Myers Squibb (BMY ): Maintains 3 STARS (hold) Analyst: Herman Saftlas The FDA approved Erbitux for colon cancer, which Bristol-Myers licenses from ImClone. Under the terms of the deal, Bristol-Myers will pay ImClone a $250 million milestone, and another $250 million if a second indication is approved, plus 39% royalty on U.S. sales. Based on S&P's analysis, S&P doesn't see Erbitux contributing to Bristol-Myers's bottom line until 2006. The company has a respectable pipeline, in S&P's view, but new products will probably not be enough to offset lost sales on patent expirations, which S&P estimates will average over $1.1 billion annually over 2004-06. S&P's target price is $31, based on a blend of S&P's forward p-e and discounted cash-flow models.  All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is or will be, directly or indirectly related to the specific recommendations or views expressed in this research report. Standard & Poor's Regulatory Disclosure Any advice, analysis, or recommendations contained in articles labeled "Insight from Standard & Poor's" reflect the views of Standard & Poor's, which operates separately from and independently of BusinessWeek Online. It is possible that BWOL may from time to time publish information that is not consistent with advice, analysis, or recommendations that are published by Standard & Poor's. Standard & Poor's and BusinessWeek Online are each units of The McGraw-Hill Companies, Inc.
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