A Summary of Special Studies Prepared by the
Global Securities and Research Group
NEW YORK, June 16 /PRNewswire/ -- The following is a summary of special
studies prepared by the Merrill Lynch Global Securities and Research Group:
The View From The U.S.:
-- The continuing merger and acquisition activity in the telecom sector
should lead to more consolidation in the small to mid-cap telecom sector.
With many of the "big deals" already announced, smaller, niche-market deals
should follow as companies attempt to extend geographic reach, round out
product portfolios and grow customer bases and revenue streams through
acquisitions. (Mark Kastan, 212-449-3241; Megan Kulick, 212-449-0847; or
Daniel Reingold, 212-449-5631.)
-- Rental car volumes are poised to grow at the fastest rate in five years
because of the ramp up in airline capacity expansion and strong demand. The
comparable cost increase for acquiring cars is nominal, well below the rate of
pricing increase, fueling high profits per transaction. In addition,
aggregate return on capital exceeds cost of capital in the rental car sector.
Low cost of capital is an advantage; and a fleet is a liquid asset to
facilitate leverage. (Mark Miller, 212-449-7085.)
-- Mid to high teens earnings growth among U.S. drug retailers should be
sustainable for the medium term. This view is supported by the recent
inventory yield turnaround in drug retailing after several years of third
party gross margin pressures. Retailers also are enjoying improved sales and
inventory productivity in pharmacy without paying the gross profit penalty now
that reimbursement rates on third party plans have stabilized. Further,
acquired chains, which had lower inventory yields, have been remodeled and
repositioned. (Mark Husson, 212-449-6770.)
-- Oil service stocks should outperform the market averages over the
remainder of the year, even after a 35 percent gain thus far in 1999. The
main driver would be the positive fundamental change in the oil markets. In
addition, peak earnings for the oil service industry should exceed the
previous peak cycle earnings in 1997, and exploration and production spending
should be up at least 10 percent in 2000 and 2001 after being down 33 percent
in 1999. (Kevin Simpson, 212-449-2664.)
The View From Outside The U.S.:
-- Global investors continue to remain optimistic on the prospects for the
U.S. dollar. Given confidence in economic growth prospects in the U.S.,
relative to Europe and Japan, investors have retained significant overweight
positions in the U.S. dollar relative to their benchmarks.
(Karim Basta, 212-449-0215.)
-- The food industry has underperformed globally. Retail consolidations
in the U.S. which are affecting investment decisions worldwide, are among the
reasons. Meanwhile, acquisition fever may pick-up as manufacturers seek to
increase their presence with consumers as well as retailers. Overall,
multinational companies with dominant market shares should benefit from the
changing environment. (Leonard Teitelbaum, 212-449-1918.)
Merrill Lynch Global Securities Research and Economics Group
-- Merrill Lynch Global Securities Research and Economics Group has more
than 700 analysts in 27 countries. Merrill Lynch (NYSE: MER) is the only firm
to place first in five of the six Institutional Investor research team surveys
(U.S. Equity, U.S. Fixed Income, Latin America, Europe and Asia.) In
addition, the firm ranked first in The Wall Street Journal 1998 All-Star
Analysts Survey, and the Financial News' "Poll of Polls," a summary of nine
equity research surveys from around the world.
-- If you would like to receive copies of the reports mentioned above,
please contact the respective analyst listed or Susan McCabe, 212-449-0389.
SOURCE Merrill Lynch Global Securities Research and Economics
Group
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http://www.merrilllynch.com
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http://www.prnewswire.com/comp/555800.html or fax,
800-758-5804, ext. 555800
CONTACT:
Susan McCabe, Research Communications,
212-449-0389, or Joanne Tutschek, 212-449-7278, both of Merrill
Lynch
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