Esterline Technologies
(ESL, $13 5/8)

52-week high: $16 5/8
52-week low: $9 1/4

Strong buy. Esterline Technologies, a leading specialty manufacturer for aerospace/defense electronics markets, reported second-quarter earnings on Wednesday that exceeded the expectations of Dain Rauscher.

Earnings per share for the quarter were $0.40 compared with Dain Rauscher's estimates of $0.38, due to stronger operating margin, according to analyst Bob Toomey. Revenue for the quarter was $122 million.

"We believe Esterline's commercial aerospace business is strengthening, which is in line with our previous expectations," said Toomey. "It appears that Esterline's U.S. aerospace-related business is now stabilizing and that inventory balancing at Boeing is showing tangible signs of coming to an end."

Orders in the first half of fiscal 2000 showed marked improvements, up 14 percent, while the order backlog is up a substantial 26 percent from a year ago, reflecting underlying strength in Esterline's business.

"We remain comfortable that our EPS estimate of $1.55 for fiscal year 2000 is achievable, based on the improving outlook for both the aerospace and automation business, as well as Esterline's focus on maintaining a healthy cost/margin structure," said Toomey.

Microsoft
(MSFT, $64 9/16)

52-week high: $119 15/16
52-week low: $60 3/8

Accumulate. Regardless of U.S. District Court Judge Thomas Penfield Jackson's final decision on remedies for Microsoft, the remedies will almost certainly be stayed until the case works through the appeals process, according to Jonathan Geurkink of Ragen MacKenzie.

Judge Jackson is expected to rule, possibly next week, on the break-up plan for Microsoft. The judge on Thursday said he would accept further written arguments from both sides.

"Given the judge's inclination thus far, it is fairly clear that he will sign the government's break-up proposal to hasten the process and move the case on to the appellate court," said Geurkink.

Geurkink added that Microsoft could overturn the decision on appeal. "We continue to believe that the company will do well at the appellate level, challenging the district court ruling on procedural issues, finding of fact and conclusions of law," he said.

PathoGenesis
(PGNS, $16 1/2)

52-week high: $34 1/4
52-week low: $12 3/4

Neutral. PathoGenesis announced this week it has begun enrolling patients in Phase IV of clinical trials to test the effectiveness of TOBI (tobramycin solution for inhalation) in cystic fibrosis patients with mild lung disease.

The patented, inhalable antibiotic is currently approved for use in cystic fibrosis patients with more extensive lung disease. If TOBI demonstrates effectiveness in cystic fibrosis patients with mild lung disease, physicians will become more aggressive in prescribing practices and this will open up TOBI to a large, new segment of the cystic fibrosis population, according to US Bancorp/Piper Jaffray's Peter Ginsberg.

While Ginsberg reiterated his "neutral" rating on PathoGenesis, he set a 12-month price target of $31 and said the stock "appears to be quite undervalued on price/earnings and price/revenues metrics."

Starbucks
(SBUX, $34 1/2)

52-week high: $45 1/4
52-week low: $19 7/8

Buy. To their taste buds' chagrin, analysts with Salomon Smith Barney in recent weeks were unable to track down Starbucks new release, the Chocolate Brownie Frappuccino in several Manhattan locations.

To gauge whether the Manhattan shortage was out of the ordinary, Salomon called 40 Starbucks outlets around the country and discovered 45 percent of the stores were experiencing outages of the product.

"The apparent success of the new product, launched nationally on May 3, could help out the company's same-store sales growth over the summer period," said analyst Mark Kalinowski.

In their informal survey of stores in New York, California, D.C., Texas and Illinois, Salomon discovered that demand for the new frappuccino flavors is so strong that stores are splitting shipments.

To further brighten the picture, Starbucks on Thursday reported a 31 percent gain in consolidated net revenues for the four-week period ending May 31. The company also reported its global expansion has exceeded 3,000 stores. "We maintain our buy rating on the stock," Kalinowski said.

Onyx Software
(ONXS, $20 5/16)

52-week high: $44
52-week low: $ 6 7/16

Accumulate. Despite a sell-off late Wednesday, Onyx made a healthy comeback Thursday, rising nearly 20 percent.

The Wednesday sell-off may have been prompted by a perception that CEO Brent Frei made negative comments about the company at a shareholders' meeting Wednesday, according to Ragen MacKenzie's Jonathan Geurkink. The meeting, however, was "upbeat and business appears strong," he said.

A leading provider in enterprise relationship management software, Onyx was caught in recent weeks in a broader sector sell off among e-business companies, including Siebel Systems.

Geurkink said Onyx's vice president of human resources offered positive data on hiring and retention at the company -- a key risk factor in the tight high tech labor market.

"Turnover is currently just 8 percent, well below the 20 percent to 25 percent common to the industry," he said. "The company has an acceptance rate of 92 percent. During the past three years, headcount has grown by 65 percent and the company expects to accelerate that to 70 percent this year."

Boeing
(BA, $39 11/16)

52-week high: $48 1/2
52-week low: $32

Strong buy. Congressional approval of permanent normal trade relations between the U.S. and China should bode well for Boeing, according to Dain Rauscher's Laurel Johnson. China is expected to be the world's second largest aircraft market, after the U.S.

"Based on a 20-year delivery forecast, we estimate China represents 12 percent of the total commercial aircraft market through 2018," Johnson said. "We believe Boeing is well positioned to benefit from improving trade relations with China due to its long and established position in this important market. We continue to view Boeing as very attractive at these levels."

Adobe
(ADBE, $118 1/2)

52-week high: $131
52-week low: $33 1/2

Market perform. Pacific Crest's Jeff Goverman said his firm is modeling a 20 percent increase year-to-year for Adobe, a provider of graphic design, publishing and imaging software for the Web and print production.

Recent quarter revenue results met expectations for products such as Photoshop 5.5 and Acrobat 4.0. The current quarter looks strong, he said.

"We think visibility remains high," said Goverman. "Adobe remains well positioned from both a product and operational standpoint. We like the fundamentals, it's just a question of valuation."

Previous columns:

• RealNetworks builds on market leadership, 05-26-2000
• DJC Northwest Stock Watch, 05-19-2000
• Northwest Stock Report, 05-12-2000
• Northwest Stock Watch, 05-05-2000
• NW stock watch, 04-28-2000