Stock Review And Outlook
September 29, 2001 00:17:32 (ET)
The following is a list of stocks that were on the move over the past week as the result of the recent terrorist attack on the World Trade Center, and our latest take:
Boeing (BA, Trade): Most investors assume that the major airlines will scale back order rates in the months to come. This is true. And while over the long run we think that Boeing's technological ability and deep pockets will bode well for the common shareholder, we are left with the impression that things may only get worse before they get better. For this reason, we think that there will be a better entry point down the road.
Note: Later this year the Department of Defense will announce if either Boeing or Lockheed Martin (LMT, Trade) will receive a contract valued at $200 billion to develop the next-generation Joint Strike Fighter Jet. Obviously, if the company is able to secure the entire contract, or a significant portion thereof, the stock could react favorably.
Phillip Morris (MO, Trade): Although waning consumer confidence is likely to have an impact on consumer spending across the board, tobacco stocks will probably fare well. Given the fact that its Kraft investment appears to be doing well, and given the recent dividend hike, we think that Philip Morris has excellent upside potential.
Assuming "Mighty Mo" is able to grow earnings by 12.5% over the next year (as expected) we think this could be a $60 to $65 stock at a minimum.
Continental Airlines (CAL, Trade): Due to the recent economic slowdown, Continental had already been suffering. This past week's was merely the straw that broke the camel's back.
Note: We are not suggesting that Continental will be forced to file for bankruptcy. But even with the 12,000 announced job cuts, and a possible bailout by the federal government, we are left with the impression that it will take quite a while before the stock rebounds to the $40 range (where it traded prior to the WTC bombing). Our best advice is to sit this one out.
Anheuser Busch (BUD, Trade): Consumer confidence is slipping. But talks with several sell-side analysts lead us to believe that overall beer consumption will be strong. And, that a fourth-quarter price increase will go ahead as planned. In short, Anheuser Busch appears to be a terrific hedge against the market, particularly at these levels.
Merrill Lynch (MER, Trade): Merrill's headquarters in Manhattan's financial district has essentially been destroyed. But recent television interviews with Merrill Chairman David Komansky suggest that the company will not simply roll over. To the contrary, Komansky has assured investors that their money is safe, and that the company will work to rebuild its offices, and get its thousands of registered representatives back on the job.
That being said, the major brokerage houses are having a tough time. Banking and trading revenues are fairly thin by historical standards. And there appears to be no immediate light at the end of the tunnel. For this reason, unless you have at least at three- to five-year time horizon, we'd suggest sitting this one out on the sidelines as well.
Aon Corp (AOC, Trade): The insurance brokerage also had offices in the WTC. However, the tragedy appears unlikely to have a material adverse impact on the company's financial statements. With about $2.87 per share in cash, and a book value of $13.02, Aon appears to be in sound financial shape. At current levels, we think the stock is a "buy."
Raytheon Co. (RTN, Trade): The sentiment is that this maker of defense-related electronics systems could receive several large contracts from the federal government (as the result of a military response by the US).
And although we are of the opinion that smaller defense, and security companies, such as InVision Technologies (INVN, Trade) might be a better play, Raytheon has the deep pockets, technology and wherewithal that suggest that better times lie ahead.
None of staff involved in this article have positions in the companies mentioned. |
