Enron Corp. - University of California | Office of The President

Enron Corporation (BUY)
Third Quarter Results Strong In Core Businesses; More Resolution On
Businesses Provided
• Enron released strong third quarter results yesterday, with solid volume
growth across all commodities and regions. We were pleased to see strong traction
in Europe and Other Commodities ....
* * *
Yesterday Enron reported strong third quarter earnings, posting strong results from
its Wholesale Marketing and Trading and Retail businesses.... Its successes with
Europe and Other Commodities was especially positive, as we believe this now
separate unit will provide an excellent earnings growth engine for the company.
* * *
... [I]ts debt rating of investment grade – will most likely not be tripped, as Enron's
ratings were reaffirmed by Fitch and Standard and Poor's. Moody's has put the
company on credit watch, but ENE would have to slip two ratings levels in order
to fall below investment grade.
... The important take away is that Enron's earnings are supported by its cash flow,
and are certainly sustainable.
374. On 10/19/01, CS First Boston issued a report. The report continued to rate Enron a
"Strong Buy" and continued to forecast 01 and 02 EPS of $1.80 and $2.15 for Enron. It also stated:
ENE declined by 10% yesterday in response to additional concerns about a $1.2
billion reduction in shareholder's equity (offset by a $1.2 b reduction in Notes
Receivable).
* * *
Despite the obvious and serious concerns raised by the nature and background of the
$1.2 billion equity reduction, we continue to look at ENE as a Merchant, Energy
Services and Pipeline business capable of exceeding 20% eps growth on an annual
basis.
Because we expect that this growth will occur and we regard our eps estimates for
ENE as conservative at $1.80 in '01 and $2.15 in '02, we continue to rate it Strong
Buy.
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