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S&P Ups Carnival to Accumulate

Carnival (CCL): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Thomas Graves, CFA

May-quarter EPS of 41 cents, vs. pro forma 18 cents, before special items, tops our estimate by 6 cents. Booking activity looks strong but we think risks remain that terrorism fears could hurt demand. We are upping our fiscal 2004 (Nov.) EPS estimate to $2.22 from $2.08, and fiscal 2005's to $2.70 from $2.52. We expect Carnival to benefit from prospects for easing growth in industry capacity and for free cash flow to rise beyond fiscal 2004. We are boosting our 12-month target price to $53, from $48 on our expectation that Carnival's p-e premium to the S&P 500, now about 6% based on calendar 2005 estimates, will widen.

Jabil Circuit (JBL): Reiterates 4 STARS (accumulate)

Analyst: Richard Stice, CFA

Jabil posted May-quarter EPS of 26 cents, before acquisition, amortization, and other charges, vs. a year-ago's 19 cents, in line with our estimate. GAAP EPS is 19 cents, vs. 2 cents. Revenue rose 9% from the February quarter, led by growth in the automotive and consumer sectors. Gross margin was adversely impacted by a shift toward more material-intensive products. We are keeping our fiscal 2004 (Aug.) EPS estimate at $1.02, but raising fiscal 2005's by 12 cents to $1.39, since we believe a ramp of new programs will have a positive impact. We think Jabil's market position and valuation remain attractive. Our 12-month target price is $35.

Ford Motor (F): Maintains 3 STARS (hold)

Analyst: Efraim Levy, CFA

Citing strong performance at its financial-services operations, the company raised the second-quarter EPS guidance by 15 cents, to 45 cents to 50 cents. Our second-quarter estimate of 38 cents was above Ford's earlier projection, and we are raising our estimate by a dime now, to 48 cents. For full-year 2004, we see $2.00, raised today from $1.78. We expect auto multiples to suffer in a rising interest-rate environment. However, rising earnings should be offsetting. Based on historical and peer p-e's, we are keeping our 12-month target price at $17, or 8.5 times our new 2004 estimate.

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