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S&P Upgrades Motorola to Hold

Motorola (MOT): Upgrades to 3 STARS (hold) from 1 STAR (sell)

Analyst: Kenneth Leon

S&P thinks Motorola shares are benefiting from its intention to separate its semiconductor unit into a publicly traded company. S&P expects weak 2003 and 2004 sales and earnings for most of its businesses, but believes that an initial public offering for part of the ownership of the semiconductor unit, with a spinoff of the rest to Motorola shareholders, outweighs S&P's performance concerns. S&P's target price of $14 is based on a sum-of-the-parts valuation. S&P says it will wait for Motorola's S-1 IPO filing to determine more precise assumptions around its enterprise value. With shares trading below peers at 1.2 times S&P's 2004 sales estimate, S&P would hold Motorola.

Ruby Tuesday (RI): Maintains 3 STARS (hold)

Analyst: Dennis Milton

The restaurant operator's August-quarter earnings per share of 37 cents, up 20% from a year ago, was a penny per share ahead of S&P's estimate. Revenues grew 12%, reflecting more stores in operation and a slight decline in same-store sales growth. Margins widened on controlled restaurant costs. Ruby Tuesday sees earnings per share growth of 17% to 18% for fiscal 2004 (May). S&P is raising the fiscal 2004 earnings per share estimate by 2 cents, to $1.59, based on recent cost trends, and S&P's 12-month target price by $2, to $28, based on Ruby Tuesday's solid operating performance and strong sales volumes at new units. S&P would hold existing positions.

Regeneron Pharmaceuticals (REGN): Maintains 3 STARS (hold)

Analyst: Frank Connelly

Regeneron failed to achieve the optimal dose level of IL-1 Trap arthritis treatment in a Phase II trial. The trial did indicate that the drug proved more effective at the highest dose than at lower doses. With muted hopes for Regeneron's obesity-treatment Axokine, the company's most promising prospect now appears to be VEGF Trap, a potential cancer treatment in Phase I trials. S&P expect Regeneron and IL-1 Trap partner Novartis to continue to develop the drug to reach the optimal treatment dose. Based on the long-term potential for Regeneron's Trap pipeline, S&P would hold the shares.

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