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Technology Stocks : HS - CHS Electronics -- Ignore unavailable to you. Want to Upgrade?

To: Robert Fischl who wrote (1354)	4/28/1999 8:46:00 AM
From: Ginco	Read Replies (1) \| Respond to of 1494

Steven Patrick raises CHS Electronic target by 55%, forecasts Q1 EPS at $0.11 By Steven Patrick April 27, 1999 Current Price: $5 ¾ Year-end Target: $7 Rating: BUY In the past week, CHS Electronics stock has charged forward like a bull on the run. With three gap openings in a row and large blocks of CHS Electronics being bought, it is fair to say that the institutional investors are coming back into this beaten down stock. The computer peripheral distribution industry as a whole seems to be stabilizing which leads me to maintain my BUY rating on the stock and raise its year-end target price to $7 from $4 ½. In addition I am forecasting first quarter EPS to come in at $0.11. Back on March 22, 1999, the Company stated that based on current business conditions, it expects net sales in the first quarter of 1999 to be in the range of $2.35 to $2.45 billion. At the time, the quarter ending was only 9 days away and it is probably safe to assume that CHS's estimates are fairly reliable. Based upon an extremely conservative net sales of $2.35 billion, operating profit margin of 1.33% and net profit margin of 0.25%, I am forecasting 1st quarter EPS to come in at $0.11. Estimated Sales: $2,350,000,000 Operating Margin @ 1.33%: $31,255,000 (Same as Q4 in 1998) Other Expenses Interest income: $(5,600,000) Interest expense: $24,250,000 Earnings before inc. taxes & Minority interests: $12,605,000 Income Taxes @ 40%: $5,042,000 Minority Interests: $1,500,000 Net Income: $6,063,000 EPS: $0.11 Using 56,260,000 shares * In third and fourth quarters of 1998, CHS had a net profit margin of 0.31% & 0.45%, respectively. In addition, after the close today, three of CHS's major competitors released their first quarter earnings. Ingram Micro (IM) came in 1 cent above estimates with 28 cents, Avnet came in "in line" with estimates at 73 cents and Arrow Electronics missed estimates by 4 cents with 30 cents per share. While Arrow Electronics complained of "weakness in Europe" the other two didn't make any significant comments on Europe. Arrow did point out that sales in Asia are recovering nicely and we should expect the same for CHS in Asia too. In addition, with the latest rate cuts in Europe there should be additional capital for computer upgrades throughout Europe. Keeping in mind that IBM still has the credit line with CHS Electronics, Quantum CEO seeing a rebound in hard drive sales, IBM's strong growth in Europe and Asia in the latest quarter, I expect to see CHS at $7 by year's end if not sooner. With all said and done, I am reiterating my recommendation on CHS Electronics as a BUY. *Earnings will be released in early May.