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S&P Says Accumulate Texas Instruments

Texas Instruments (TXN): Maintains 4 STARS (accumulate)

Analyst: Thomas Smith, CFA

Shares of wireless-phone component makers Texas Instruments and R.F. Micro Devices were down 5.8% and 7.1%, respectively yesterday, compared with a 2% drop for the Philadelphia Semiconductor Index, as cell-phone maker Nokia warned on first-quarter revenue. Nokia represents about 14% of sales for TI and 45% of sales for R.F. Micro. S&P views the stutter in Nokia's sales growth as having only a mild, temporary effect on TI. The company has reported improvement in a wide range of chip lines so far in 2004. S&P is maintaining its estimates for TI's earnings per share at $1.01 for 2004, and $1.37 for 2005.

Alcoa (AA): Reiterates 4 STARS (accumulate)

Analyst: Leo Larkin

Alcoa posted first-quarter earnings per share, before a gain on an asset sale, of 37 cents, vs. 23 cents, which is less than S&P's 41 cents estimate. Sales rose 11%, beating S&P's 8% projection, but earnings per share lagged as margins in the aluminum unit contracted slightly, despite increased volume and higher prices. However, S&P is keeping the earnings per share estimates at $1.85 for 2004, and $2.25 for 2005, based on the belief that aluminum margins will improve for those periods on rising metal prices and lower unit costs. Shares trade at a p-e of 19 times S&P's 2004 estimate, compared with a p-e of 21 for the S&P 500.

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

Analyst: Tuna Amobi, CFA, CPA

MGM expects to recommend its board set a $8 one-time special dividend after it refinances its credit facility, which it sees by end of April. The move is not surprising, after MGM recently affirmed it was seeking ways to share wealth with shareholders. S&P now has a dim view of acquisition prospects as the movie studio seeks a new strategic direction, which could include going private. S&P see shares rising on the news, after an 8% gain since the earlier affirmation, but remains cautious on fundamentals, and will reconsider its $18 sum-of-the-parts 12-month price target after the dividend is certain.

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