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S&P Says Buy P.F. Chang's

P.F. Chang's China Bistro (PFCB): Maintains 5 STARS (buy)

Analyst: Markos Kaminis

After discussions it initiated with the SEC, P.F. Chang's says it will restate past financial results, and report forward results, so that a portion of its partnership program will reflect a compensatory element. The company will incur a pretax charge of $11.5 million in the first quarter to write off unamortized portions of difference between imputed fair value and actual cash contributions paid by partners for restaurants opened before 2004. Although earnings per share will be reduced, there will be no impact to cash flow. Supported by S&P's discounted cash-flow valuation, S&P still favors P.F. Chang's and view its partnership program as key to its success.

3M (MMM): Reiterates 3 STARS (hold)

Analyst: James Sanders

3M announced that it expects earnings for first-quarter and full-year 2004 to be higher than previously expected. Given the continued above-average growth rates reported for the Asia-Pacific region and management's penchant, in S&P's view, for lowering cost structure, S&P isn't surprised by this announcement. S&P is raising the first-quarter earnings per share estimate to 86 cents, from 81 cents, and is upping the full-year 2004 estimate to $3.58, from $3.53. After applying 3M's historical average

price-earnings to S&P's 2004 earnings per share estimate and blending it with a discounted cash-flow model, S&P is maintaining the 12-month target price of $82.

Metro-Goldwyn-Mayer (MGM): Maintains 3 STARS (hold)

Analyst: Tuna Amobi, CPA, CFA

MGM says it's exploring ways to share more wealth with stockholders, including a tender offer, stock buyback, or special dividend. S&P thinks this is consistent with the comoany's recent stance and its two tender offers in the past six months. While MGM has lately enhanced its financial flexibility, S&P thinks competition has intensified lately in the acquisition landscape, as several media and entertainment conglomerates appear to be on the prowl. With MGM float now well below 25%, S&P thinks going private could ultimately be in the cards. S&P's target price is $18, based on a sum-of-the-parts valuation.

Apple Computer (AAPL): Maintains 3 STARS (hold)

Analyst: Megan Graham Hackett

Apple announced that it has sold 50 million songs since the debut of its iTunes Music Store download service. However, the company noted that it won't meet its goal of 100 million songs by the end of Apr., 2004. Still, S&P sees little profit impact from the expected shortfall since Apple largely provides the service to help spur sales of its iPod music device, which S&P think continues to sell well. S&P's fiscal 2004 (Sep.) earnings per share estimate remains 44 cents. The shares trade at a p-e of 60 times S&P's fiscal 2004 earnings per share estimate -- above peers. With nearly $13 per share in cash and equivalents, S&P views Apple as fairly valued.

Best Buy (BBY): Reiterates 5 STARS (buy)

Analyst: Amrit Tewary

S&P believes near-term catalysts are in place for Best Buy to post strong comp-store sales gains in the May quarter and full-year fiscal 05 (Feb.). S&P expects some consumers to spend their tax refund dollars on larger-ticket consumer electronics items such as plasma and LCD TVs. Also, S&P thinks the company's Reward Zone program, as well as marketing/advertising initiatives, will continue to drive customer traffic at its stores above levels seen at peers. S&P's target price of $66 is based on S&P's historical p-e model and assumes a target p-e of 23 times S&P's fiscal 2005 (Feb.) earnings per share estimate of $2.87.

General Electric (GE): Reiterates 3 STARS (hold)

Analyst: Robert Friedman

GE says it plans to buy bomb detector-maker InVision Technologies, pending necessary approvals. At 9 times the 2003 EBIT, S&P thinks the price of the planned deal is attractive. But, S&P doesn't think the acquisition will make big difference to GE's long-term bottom line. Even if S&P uses GE's 20% annual revenue growth forecast for InVision, S&P calculates that 10-year sales would reach $2.5 billion, which is not even 2% of current GE revenues. S&P thinks this example bolsters S&P's argument that GE's size materially lowers the chances of sustainable 10% annual earnings per share growth rates. S&P's discounted cash flow-based target price is $30.

Lehman Brothers (LEH): Maintains 5 STARS (buy)

Analyst: Robert Hansen, CFA

February-quarter earnings per share of $2.21, vs. $1.15 easily beat S&P's $1.55 estimate, driven by strength in equity underwriting, sales and trading, and M&A advisory. Results were helped, in S&P's view, by continued interest-rate volatility and a steep yield curve. S&P will review the earnings per share estimates and target price after a conference call. S&P thinks Lehman is firing on all cyclinders, and would buy its shares, given the company's marketshare gains, attractive valuation, and operating leverage. S&P think Lehman's results bode well for the financial-services group.

Abbott Labs (ABT): Reiterates 4 STARS (accumulate)

Analyst: Frank DiLorenzo, CFA

Abbott announced a U.S. District Court ruling that TorPharm's generic version of Depakote (divalproex sodium) infringes upon Abbott's patents. Initial patents for Depakote expire in 2008. S&P believes that there has been a generic overhang on Abbott shares, including concerns over Biaxin, Synthroid, and Tricor. However, S&P expects Humira strength, a diagnostic rebound, and other products to compensate and drive earnings growth. S&P continues to believe that Abbott's pipeline is underrated. Based on S&P's

discounted cash-flow, the 2-month target price remains $54.

Fisher Scientific (FSH): Initiates with 4 STARS (accumulate)

Analyst: Jeffrey Loo, CFA

S&P believes recent acquisitions should help boost 2004 sales growth to about 15%, excluding a foreign-exchange impact. These transactions provide Fisher with a solid presence in the life-science market, in S&P's opinion, while S&P expects core scientific research and clinical lab markets to grow in the mid- to high-single digits. S&P believes an improved business mix, along with fixed-cost leverage, should drive a 130-basis-point operating margin improvement, and S&P sees 2004 earnings per share rising 17%, to $2.76, excluding non-recurring charges. Based on a discounted cash-flow valuation, S&P's 12-month target price is $61.

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