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Reading the STARS -- 11/21/03

New 5-STARS this week: During the trading week ended Nov. 21, the following issues were added to Standard & Poor's list of stocks with its highest investment ranking, 5 STARS (buy). S&P analysts expect those issues to outperform the S&P 500 index by a very wide margin over the next 6 to 12 months.

Nextel Partners (NXTP

; recent price, $30)

S&P analyst Kenneth Leon upgraded shares of the digital mobile communications provider from 4 STARS (accumulate) on Nov. 19. He views Nextel Partners (31% owned by Nextel Communications [NXTL

]) as attractive compared with the S&P 500 and the company's industry peers after an 18% sell-off from its recent 52-week high. Although the shares trade at a slight premium to the peer group based on Leon's 2004 sales estimate, he expects them to outperform, based on revenue growth expected near 40% and widening EBITDA service margins as the company expands its presence in small U.S. markets with a total of 53 million potential users. Leon also believes Nextel Partners benefits from sharing the same service offerings and back office with Nextel Communications. S&P's 12-month target price for Nextel Partners is $15.

New 1-STARS this week: These stocks joined the ranks of 1-STARS stocks -- S&P's designation for issues expected by S&P analysts to underperform the S&P 500 index by a wide margin over the next 6 to 12 months -- during the trading week ended Nov. 21:

ProQuest (PQE

; recent price, $36)

S&P analyst Mark Basham downgraded the shares of the specialty information services outfit from 2 STARS (avoid) on Nov. 18. He says a detail in ProQuest's third-quarter SEC filing implies that internal growth was below 1%, rather than the 3.3% he inferred from the company's press release. This suggests to Basham that deterioration in ProQuest's traditional products is more pronounced than he had thought, and is occurring despite strong U.S. GDP growth. With S&P's view that acquisition-related and cost-cut effects are likely to be sizably smaller in 2004, Basham's EPS estimate of $1.71 on a 4% revenue rise anticipates that weak internal growth trends will persist. He is adjusting his

discounted cash-flow-based 12-month target price to $20 from $17.

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