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S&P Upgrades Cigna to Hold

Cigna (CI): Upgrades to 3 STARS (hold) from 2 STARS (avoid)

Analyst: Phillip Seligman

Insurance giant Cigna posted second-quarter operating EPS before a reserve development of $1.39, vs. $1.13, 9 cents above our estimate. Premiums and fees fell 13%, membership 17%, but we think the healthcare segment's 81% rise in earnings were driven by price hikes and lower utilization rates. Cigna now sees 2004 EPS, absent any developments, of $5.38 to $5.68. We think the pricing environment and intensifying competition will further cut enrollment. Given Cigna's operating gains, we're raising our 2004 EPS estimate by 15 cents to $5.70, and upping 2005's by 20 cents to $6.20. We're raising our target price by $10 to $68.

Wendy's International (WEN): Maintains 5 STARS (buy)

Analyst: Dennis Milton

The fast-food chain reported July same-store sales grew 3.9%, year-to-year, at domestic company-owned Wendy's stores, and 2.0% to 2.3% at franchised units, rebounding from lower levels of growth in June. Same-store sales at Tim Horton's stores rose 7.9% to 8.0% in Canada and 11.0% in the U.S. We're maintaining our 2004 EPS estimate at $2.37, 2005's at $2.61, and our 12-month price target at $46. At 13.4 times our 2005 estimate, shares are at a discount to peer levels. We believe Wendy's is entitled to a premium to peers, given our view of its superior growth prospects and its solid operating history.

InterActive Corp. (IACI): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Scott Kessler

InterActive reported adjusted net income of 22 cents, vs. 18 cents, in line with our estimate. GAAP EPS were 9 cents, vs. 16 cents. Comparable net revenues rose 17%, driven by 34% growth in IAC Travel. Excluding the travel business, revenues increased only 8%. Based on the inventory and competitive challenges that we think IAC Travel faces, and issues of some other InterActive businesses, we're lowering our EPS estimates for 2004 to 90 cents from 95 cents, and for 2005 to $1.08 from $1.10. We're also reducing the growth forecasts in our discounted cash-flow model, and cutting our 12-month target price to $25 from $40.

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