ICN Pharmaceuticals (ICN ): Upgrades to 3 STARS (hold) from 1 STAR (sell)

Analyst: Herman Saftlas

New management appears to be putting ICN back on track, with the divestiture of money-losing operations, plant closures, and the workdown of high wholesaler inventories. Although developments related to generic ribavirin litigation may create near-term volatility, S&P sees long-term value here, based on benefits from ongoing restructuring moves and an improved R&D pipeline. S&P projects earnings per share of 95 cents in 2003 and $1.05 in 2004. Despite a recent rise, the shares are still valued at steep discounts to peers based on p-e and price/sales measures.

Harrah's Entertainment (HET ): Maintains 4 STARS (accumulate)

Analyst: Thomas Graves

Harrah's has expanded its majority-owned Louisiana Downs racetrack to include about 900 slot or video poker machines. S&P views this as part of an industry trend toward racetracks becoming "racinos," and it is a further extension of Harrah's diversity, which also includes a broad geographic presence. S&P estimates 2003 earnings per share at $3.10. With the company expected to produce roughly $2.10 per share of free cash flow (after all capital expenditures) in 2003 and its stock at a below-market p-e valuation, S&P views Harrah's as attractive.

SBC Communications (SBC ): Maintains 2 STARS (avoid)

Analyst: Todd Rosenbluth

After discussing regulatory issues with FCC Commissioner Martin on Wednesday , S&P thinks believe SBC's operating environment is likely to remain challenging. Martin expects the FCC's final order on UNE-P wholesale access rate policy to be out in early June and should allow for a gradual transition away from UNE-P in three years. In S&P's view, given low UNE-P rates in SBC's backyard, wireline competition should stay high. Also, in responding to an S&P question, Martin seemed positive on wireline-to-wireless local number portability, which if implemented, would boost substitution.

Eaton Vance (EV ): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Robert McMillan

The investment management services firm posted April quarter earnings per share of 36 cents vs. 46 cents -- below estimates. Results were hurt by a 9% drop in total revenues, fractionally lower expenses, and a 2% drop in assets under management to $58 billion. Growth in fixed-income fund assets partly offset declines in stock fund assets. Relative to declines at some other asset managers, S&P views the slight dip in Eaton Vance's assets as favorable. Near term, S&P expects Eaton Vance, with its balanced product line, to outperform a volatile stock market, which may be affected by concerns about the economy and investor skepticism. S&P is reviewing its estimates.

Dillard's (DDS ): Downgrades to 2 STARS (avoid) from 3 STARS (hold)

Analyst: Jason Asaeda

Excluding one-time items, the department-store chain reported April-quarter earnings per share of 8 cents, vs. 68 cents, well below the Street's mean. Comp-store sales declined 5%, and operating margins narrowed on markdowns and increased bad debt and other selling, general, and administrative expenses. Given the company's weak sales momentum, S&P cut the fiscal 2004 (Jan.) operating earnings per share estimate to 95 cents. Because April-quarter markdowns were taken as an immediate reduction of the retail value of inventories, S&P expects margins to widen as sales improve. But, with limited near-term visibility and Dillard's trading at 14 times S&P's fiscal 2004 earnings per share estimate, above peers, S&P would avoid the shares.

Boston Scientific (BSX ): Reiterates 5 STARS (buy)

Analyst: Robert Gold

At Wednesday's Paris Course on Revascularization, Boston Scientific released some results from three of its clinical trials of the Taxus drug-eluting coronary stent that showed safety and efficacy in two-year patient follow-ups. The stock has been strong ahead of the presentation, which S&P thinks reflected speculation that Boston Scientific would discuss data from the Taxus IV trial. This did not occur, but S&P notes that the biotech firm remains confident about a U.S. launch of Taxus in 2003. In Europe, where Taxus competes against Johnson & Johnson's Cypher stent, S&P thinks Boston Scientific has captured significant market share.

Hewlett-Packard (HPQ ): Maintains 3 STARS (hold)

Analyst: Megan Graham Hackett

H-P posted pro forma April-quarter earnings per share of 29 cents -- 2 cents ahead of the Street's mean. Revenues of $18 billion, up 1% quarter over quarter, were slightly above S&P's expectations, as Enterprise Systems grew 3%, and Imaging/Printing fell 1% quarter over quarter, due to seasonality; PC sales were flat. Earnings per share quality was O.K., with most of the upside from gross margin, and free cash flow for the quarter was $2.1 billion. The PC-printer maker affirmed the Street's second-half earnings per share and revenue estimates. S&P is upping the fiscal 2003 (Oct.) earnings per share by 2 cents, to $1.20. At a price-sales ratio of 0.7, while below the peer average, with the inforrmation-technology environment still viewed as challenging, S&P says hold the shares.

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