Thursday, June 08, 2000
Index puts Convergys in spotlight
By Amy Higgins
The Cincinnati Enquirer
With Convergys' addition to the Standard & Poor's 500 Index, Wall Street finally is seeing the value Greater Cincinnati investors have recognized for two years.
And with the company's continued growth prospects, this national notice will likely be more than just a glance, said Jim Russell, director of equity research at Fifth Third Bank in Cincinnati.
“There's no question that addition to the S&P 500 will bring an additional layer of visibility and comfort level for Wall Street,” Mr. Russell said. “It's no longer just a quirky little company.”
Standard & Poor's announced late Monday that the Cincinnati-based billing services provider, spun off of Cincinnati Bell in August 1998, will replace Times Mirror in the index on Monday.
But gaining the attention on Wall Street can be self-perpetuating. The stock increased from under $18 a share in November to Monday's close of $48 — and thus
Convergys' market capitalization almost tripled from $2.6 billion to $7.3 billion; that caught the attention of the index committee at S&P.
“Companies that tend to grow make it on our radar screen,” said Elliott Shurgin, S&P vice president of index services. “They don't get included for performance, but catch our attention in terms of size, liquidity and representation of their market sector.”
Mr. Shurgin acknowledges a certain “index effect,” when a stock's inclusion — especially in the S&P 500 — can drive up its price. Besides the visibility, the index creates a demand from managers of mutual funds designed to mimic the index.
But Mr. Russell said other internal factors will keep Convergys on Fifth Third's favored list. He expects Convergys to expand and continue increasing earnings by at least 20 percent a year. He said the company will likely beat his earnings estimates of $1.23 in 2000 and $1.47 in 2001.
“That is well within our longterm objectives,” Convergys investor relations director Ron Harris said, adding that the company's addition to one of the most-watched indexes is validating.
“People are understanding just what our growth prospects are and what a market position we really have,” he said. “It's a prestigious group to be aligned with.”
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