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Sears, Kmart Boosted by Merger News

Sears, Roebuck (S) and Kmart (KMRT) shares traded solidly higher Wednesday after the two retailing giants agreed to merge in a deal valued at $11 billion. Kmart holders will get one share of new Sears Holdings stock for each Kmart share. Sears holders will have the right to elect $50 in cash or 0.5 Sears Holdings share for each Sears share. S&P upgraded Sears stock to hold from strong sell.

Martha Stewart Living (MSO) was seen higher Wednesday on news of the Sears and Kmart merger, which will raise prospects for the distribution of Martha Stewart products.

Altria Group (MO) is among tobacco stocks seen higher on reports that a federal appeals court panel is pressing the issue of whether the government has the authority to fine cigarette makers billions of dollars as part of its racketeering case.

Hewlett-Packard (HPQ) posted fourth-quarter earnings per share (non-GAAP) of 41 cents, vs. 36 cents a year ago, on an 8% revenue rise. The company sees first-half fiscal 2005 earnings per share of 72 cents to 74 cents on revenue of $41.8 billion to $42.3 billion. S&P maintained its hold rating.

News Corp. (B class) (NWS) and News Corp. (A Class) (NWS.A) will be added to the S&P 500 index after the close of trading on Dec. 17. The company to be replaced will be announced at a later date, roughly three to five business days before News Corp.'s addition.

Network Appliance (NTAP) posted 15 cents, vs. 13 cents second-quarter earnings per share on a 36% sales rise. The company sees 15 cents to 16 cents third-quarter earnings per share (pro forma), on a 35% to 38% sales rise, and 60 cents to 61 cents fiscal 2005 earnings per share. S&P reiterates its sell rating.

RSA Security (RSAS) dropped after Citigroup downgraded the stock to hold from buy.

CTI Molecular Imaging (CTMI) gains after Bear Stearns upgrades the stock to outperform from peer perform. Yesterday, the company posted 20 cents, vs. 11 cents fourth-quarter earnings per share.

CommScope (CTV) rose after CIBC World upgraded the stock to sector outperform from sector perform. S&P reiterates its hold rating. Yesterday, the company forecast $1.2 billion to $1.3 billion in 2005 sales, driven by modest volume growth and anticipated price increases.

Phillips-Van Heusen (PVH) posted 52 cents, vs. 34 cents third-quarter earnings per share on a 4.4% revenue rise. The company raised its 2004 revenue estimate to $1.65 billion to $1.66 billion, and earnings per share to $1.29 to $1.30 (excluding items). Beyond 2004, the company says it is comfortable in its ability to grow earnings per share at 15% to 20% per year, and revenues 5% to 6%.

GeoResources (GEOI) posted 11 cents, vs. 5 cents third-quarter earnings per share on a 43% revenue rise.

St. Paul Travelers (STA) received a subpoena from the New York Attorney General office relating to an offer or sale of "non-traditional," or loss mitigation, insurance products.

Borders Group (BGP) posted a 2-cents third-quarter loss per share, vs. a penny earnings per share a year ago, on 1.6% lower same-store sales at Borders superstores and a 4.1% decline at Waldenbooks. Total sales rose 3.1%. The company sees $1.55 to $1.62 fourth-quarter earnings per share.

Nordstrom (JWN) posted 54 cents, vs. 33 cents, third-quarter earnings per share on 8.1% higher same-store sales and 9.4% higher total sales. The retailer raised its fiscal 2005 earnings-per-share estimate to $2.68 to $2.73.

Quiksilver (ZQK) raises fourth-quarter earnings-per-share guidance to 39 cents to 40 cents, and revenue to $345 million to $348 million. The company says it is seeing no sign of a slowdown in business. Wedbush Morgan raises estimates and target.

Brocade Communications Systems (BRCD) rises after it says a unit of Hitachi is to resell its next-generation midrange Storage Area Network switches. Separately, First Albany raises its target ahead of teh fourth-quarter earnings-per-share report due out Nov. 22. S&P keeps its hold rating.

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