From Value Line (07-16-2004): Intel shares have fallen quite sharply in trading today following uninspiring news related to the chip behemoth’s second-quarter results. Although sales just north of $8 billion and share net of $0.27 were both roughly in line with expectations, the company’s outlook for the remainder of this year is not quite so favorable. More precisely, management now expects the gross margin to be 60% plus or minus a couple of percentage points, compared with prior guidance of 62%. This primarily reflects increased revenue of lower-margined products such as flash memory chips, chipsets, and motherboards. What’s more, a slight reduction in average selling prices of microprocessors and a slower-than-anticipated reduction in manufacturing costs per unit will also likely hinder profits. As a result of the recent news, we have lowered our 2004 share-net target, from $1.25 to $1.20. Intel shares remain ranked 3 (Average) for Timeliness.
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Sysco Corporation, the food wholesaler–not the manufacturer of computer routers, is another solid buy candidate. SYY is a high quality growth company.
SYY made the Forbes’ 2004 list of the 26 best managed companies in America. Value Line gives SYY its highest ratings for both financial Strength (A++) and earnings persistence (100). SYY is a large company with annual sales of more then $8 billion.
The first call consensus EPS five-year growth rate is 15%. The SSG above uses a more conservative EPS growth rate of 11.9%. Using this lower rate, projected average return over five years is 11.3% and the total return (assuming sale at a high PE) is 14.5%. The upside downside ratio is 3.7.
This would be a particularly good stock for our portfolio since it is in an industry that we don’t hold.
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Medtronic is one of two stocks to consider buying during the month of October. (The other is Health Management Associates.)
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Health Management Associates is one of two stocks to consider buying during the month of October. (The other is Medtronic.)
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