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Downgrading Fleming Cos. to Hold

Fleming Cos. (FLM): Downgrades to accumulate from buy

Analyst: Joseph Agnese

S&P sees added risk amid the economic slowdown and a tough competitive environment within the markets it supplies. Despite the recent extension of a Kmart contract to include ethnic and specialty foods, the dependence on this agreement exposes Fleming to KMart's price-competitive environment. Retail sales are falling as the company disposes of its own conventional supermarkets in favor of low-cost, price-impact supermarkets. S&P is lowering the 2002 EPS estimate to $2.47, from $2.54. However, at about nine times that estimate, Fleming remains attractive compared to peers.

Aetna (AET): Upgrades to 3 STARS (hold) from 2 STARS (avoid)

Analyst: Phillip Seligman

The health insurance giant will cut about 4,400 positions via targeted cuts, and 1,600 via attrition. The cuts began in Q4, and will continue through 2002. The cut is to align staff with expected materially lower membership levels amid rate hikes to cover high medical cost trends and the culling of unprofitable products and markets. Aetna is taking a Q4 after-tax charge of about $125 million for severance and associated facilities costs. S&P sees the move improving chances for the company's hoped-for return to profit in 2002. S&P sees the company in black in the second half, but thinks visibility still is low because of intense competition.

Univision Communications (UVN): Reiterates 3 STARS (hold)

Analyst: Howard Choe

AOL will launch a comprehensive Spanish-language TV ad campaign on its Univision network and promote Hispanic content from the website on various properties. Univision in turn will extend its online reach to a broader audience (including Hispanic bilinguals), extend the use of popular AOL email and Instant Messenger applications, and add an inclusion in AOL keyword: Latino. The deal seems like a win-win for both parties and reaffirms Univision as a media powerhouse but also valued like one at an ample 31 times S&P's estimated 2001 EBITDA.

Lucent (LU): Reiterates 3 STARS (hold)

Analyst: Ari Bensinger

Amid the weak telecom-spending market, the company sees December-quarter sales down over 30% from September-quarter sales and a loss per share of $0.23-$0.26, well below S&P's projection of a 13% sequential sales decline and a $0.16 loss per share. S&P expects December-quarter sales to be bottom, and projects March-quarter sales up from December-quarter sales. S&P believes Lucent's target of 35% gross margin during fiscal 2003 was way too aggressive. Lucent is in full compliance with financial covenants and is moving forward the Agere Systems spin-off. S&P is widening the 2002 loss per share estimate to $0.63 from $0.40. At 1.6 times S&P's 2002 sales estimate, below peers, S&P sees challenges already factored into the stock price.

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