WALL STREET, CALIFORNIA : STREET STRATEGIES / : Picking Firms Where Profit Optimism Is Rising

Never mind those fancy “Internet backbone” stocks. Who do you like in the nickel sector?

That may be what more investors are asking these days--if they’re focusing on companies whose earnings outlook for 2000 is growing significantly brighter.

From Wall Street’s point of view, healthy 1999 profit growth at many companies is already considered to be in the bag. Indeed, earnings-tracker First Call estimates that operating earnings for the Standard & Poor’s 500 companies will be up 17% this year, after a meager 3.7% rise in 1998.

But what about 2000? If many investors are just beginning to focus on earnings estimates for next year, they may be drawn to stocks of companies whose growth expectations are rising fastest.

An improving earnings outlook may be even more important than usual in stock selection in the near term, given the concerns about rising interest rates and market fallout from worries over the year 2000 computer bug.

The Times asked Zacks Investment Research, which tracks analysts’ estimates of corporate earnings, to generate a list of major companies whose earnings-per-share estimates for fiscal 2000 have risen fastest over the last 12 weeks.

In other words, these are companies about which analysts, on average, are increasingly bullish with regard to year 2000 profit growth.

The analysts could be wrong in raising their estimates, of course. And some of the stocks listed here--especially in the natural-resources sector--certainly are already reflecting significant earnings improvement next year.

Still, this list may at least point investors in the direction of companies about which Wall Street feels more and more confident on the subject of year 2000 earnings gains.

A look at some of the companies:

* At the top of the list is Inco Ltd., the big Canadian miner of nickel and other basic metals. The company is expected to lose money this year, but a recent surge in metals prices--fueled in part by Asia’s recovering economy--has led analysts to raise their consensus estimate for Inco’s 2000 earnings per share by 189.6% over the last 12 weeks, to 35 cents a share.

And the most optimistic analysts following Inco think the company could earn as much as $1.40 a share next year.

Other metals firms whose 2000 earnings estimates have been rising include copper giant Phelps Dodge and aluminum titan Alcoa--both of which are actively trying to acquire other companies in their industries to further boost profit prospects.

* As crude oil prices hang at $22 a barrel, Wall Street continues to raise its expectations for energy companies’ earnings in 2000. Analysts’ consensus estimate for Anadarko Petroleum, for example, has jumped 47%, to 60 cents a share, in the last 12 weeks.

Anadarko stock, meanwhile, has slipped from $40 in June to $34.

Other energy firms on the list include Occidental Petroleum, Apache, Amerada Hess and Burlington Resources.

* Tech companies with rising year 2000 estimates include software developer Computer Associates International, chip makers National Semiconductor and LSI Logic and tech mega-stars Cisco Systems, Microsoft and Oracle.

* San Diego-based telecommunications equipment maker Qualcomm took a hit last week when one analyst said second-half profit probably won’t top estimates by as much as it has in the past. But analysts overall have boosted Qualcomm’s year 2000 estimate 36.2% over the last 12 weeks.

* “Plastics” might have been the buzzword in the late ‘60s, as fans of “The Graduate” will tell you, but as we head into the new millennium, a key buzz-phrase is “fiber optics.”

Shares of Corning Inc., a producer of high-performance fiber-optic components for the telecom industry, have surged over the last year. And analysts continue to raise their earnings estimates for the company in 2000.

* Detail-obsessed CEO Joe R. Lee has lifted Darden Restaurants from its funk in recent years, and analysts still like the outlook for 2000, as average earnings estimates continue to rise. But shares of the operator of Red Lobster, Bahama Breeze and Olive Garden casual eateries have pulled back from $22 in July to $17.

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Bullish on 2000

Here are the major companies whose earnings-per-share (EPS) estimates for 2000 from Wall Street analysts have been rising fastest recently. Shown here are consensus EPS estimates for the current year, for fiscal 2000 and the percentage by which analysts have raised the 2000 estimate during the last 12 weeks.

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12-wk Current Fiscal Tic Current % chg. fiscal year 2000 Company sym price ’00 EPS est. EPS est. EPS est. Inco Ltd N $20.94 189.6% -$0.09 $0.35 Anadarko Petroleum APC 34.00 47.0 0.16 0.60 Boise Cascade BCC 37.00 45.8 1.88 2.90 Phelps Dodge PD 57.19 38.6 0.43 2.44 Qualcomm QCOM 163.38 36.2 2.32 3.55 Georgia-Pacific GP 43.00 34.4 4.03 4.59 Loews LTR 80.38 34.3 8.48 10.27 Occidental Petrol. OXY 22.38 29.6 0.23 0.91 Apache APA 45.19 29.5 0.99 1.64 Computer Assoc. CA 55.25 21.7 3.27 3.75 Weyerhaeuser WY 58.06 21.6 2.89 3.93 Amerada Hess AHC 61.69 20.8 1.48 2.53 Kerr-McGee KMG 58.69 16.1 2.11 2.82 Darden Restaurants DRI 17.00 14.8 1.10 1.23 Pulte PHM 23.75 14.0 3.39 3.81 Nat Semiconductor NSM 30.50 13.2 0.61 1.96 FDX FDX 45.44 12.1 2.44 2.78 LSI Logic LSI 58.81 10.8 1.00 2.08 Burlington Res 40.94 10.8 0.63 1.26 Cisco Systems CSCO 70.94 10.7 0.97 1.24 Circuit City CC 37.75 10.2 1.46 1.81 Microsoft MSFT 95.88 10.0 1.56 1.84 Oracle ORCL 41.50 9.2 1.05 1.30 Navistar Intl. NAV 51.25 9.0 5.47 5.64 Unisys UIS 43.81 8.1 1.51 1.84 Alcoa AA 64.31 8.0 2.72 3.72 J.P. Morgan JPM 133.81 8.0 9.76 10.24 General Dynamics GD 63.50 7.8 3.43 3.86 Applied Materials AMAT 77.38 7.7 1.71 2.78 Corning GLW 69.06 7.6 1.85 2.29

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Source: Zacks Investment Research