Anchor Glass Container initiated with "neutral"

Shares of Anchor Glass Container, a leading US-based supplier of glass containers, primarily to the beverages sector, are currently trading at $16.20.According to Merrill Lynch’s research note published this morning, the company is the third largest manufacturer of glass containers in the US.The analysts express their concern, however, regarding the company’s overdependence on its top customer, Anheuser-Busch. The majority of Anchor Glass Container's volumes are derived from the beverage sector, the analysts mention. There has, however, been a significant decline in the beverage sector's performance this year, on account of adverse climatic conditions. The company’s 2003 glass container shipments and net sales are expected to decline by 2.9% and 0.9%, respectively, from the previous year’s levels, the analysts say.

A new contract from Cadbury Schweppes would boost Anchor Glass Container’s 2004 volumes and net sales growth, Merrill Lynch believes. The company may also benefit from the price momentum expected next year, the analysts add. Merrill Lynch anticipates normalized top-line growth for the company in 2005, with an improved product portfolio and enhanced productivity as the key drivers. The company’s stock trades at a significant premium to its peers, which warrants the current rating, the analysts say.

The EPS estimates for 2003 and 2004 are -$1.67 and $0.74, respectively. The P/E estimate for 2005 is 21.9x.

Merrill Lynch initiates coverage of Anchor Glass Container with a "neutral" rating.