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To: E.J. Neitz Jr who wrote (38276)	2/7/2002 9:06:33 AM
From: E.J. Neitz Jr	Read Replies (1) \| Respond to of 53068

CSFB Report--Cendant (One for Larry!) Main \| Daily Research \| Weekly Review \| Monthly Analysis \| Investment Ideas \| Reports \| Search CENDANT (CD: $15.57) 02/07/02 Beats 4Q Expectations; Fundamental Story Continues to Gel Rating: STRONG BUY 12-Mo. Target: $30 Cendant reported 4Q adjusted EPS of $0.23 versus $0.22 in the year-ago period and ahead of our estimate of $0.21. Better-than-expected revenues ($2.58 billion versus our estimate of $2.41 billion) drove the variance. Adjusted EBITDA margins came in right in line at 22.1%. We are raising our 2002 EPS estimate from $1.28 to $1.31 owing to the expectation of slightly more stability in the rate-sensitive businesses and a more constructive stance on the pace of recovery in the travel segments. We are also lifting our 2003 estimate from $1.47 to $1.50. A continued rebound in travel demand and traction on tactical steps being taken to exploit CD's vertical positioning in the travel category represent key sources of upside and catalysts for stock price appreciation. We forecast free cash flow of $2.15B, or $2.10 per share, in 2002 and $2.45B, or $2.25 per share, in 2003. ROIC is expected to trough in 2002 at 12.1% and trend steadily higher following the forecasted completion of the funding of the CUC contingent liability in the 2Q. At 12/31, CD had $4.6B of liquidity ($2.00B of cash and $2.60B of undrawn credit lines), $6.59B of debt, $7.10B of equity and a net debt/cap ratio of 36%. We view CD's business practices and use of unconsolidated entities as appropriate, and financial disclosure is excellent. As such, we believe management is unlikely to implement material change as a result of the recent shift in investor psychology. Our $30 target reflects the average of several intrinsic valuation analyses. With the fundamental story gelling, we expect the stock to move higher as investor attention eventually shifts back to CD's strong cash flow growth.