Equifax (EFX ): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Scott Kessler

Following a sell-off over the past few months, S&P sees the shares of this provider of information and marketing services as attractively valued versus the S&P 500 and peers. S&P believes Equifax, a leader in online credit report services, is poised to benefit from both improving consumer sentiment and spending in North America, and turnarounds in its international operations. The North American information services segment accounted for 84% of second-quarter revenues. Based largely on S&P's analysis of the p-e and p-e-to-growth of the S&P 500 data processing & outsourced services sub-industry, S&P's 12-month target price is $27.

UTStarcom (UTSI ): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Ari Bensinger

The recent drop in the stock price follows market speculation that major customer China Netcom is terminating expansion plans for its PAS networks. S&P has long stated its concern that an impending, fully mobile 3G license to China Netcom will likely hamper UTStarcom's core non-roaming PAS technology. However, given the quick return on investment inherent in PAS, S&P believes a full discontinuation is unlikely and views the pullback as an overreaction. Applying a blend of average group forward p-e and price-to-sales ratios, S&P derives a 12-month target price of $40.

Chico's FAS (CHS ): Maintains 4 STARS (accumulate)

Analyst: Michael Driscoll

Chico's announced that it will discontinue its Pazo 10-store test in order to focus on growth at core Chico's chain, the newly acquired White House/Black Market business, and Chico's intimate merchandise concept. S&P views this decision as sound, given the highly competitive environment for Pazo's target demographic and the resulting price and margin pressure. S&P is trimming the fiscal 2004 (Jan.) earnings per share estimate by 2 cents, to $1.08, to reflect Pazo's closing, and still sees fiscal 2005 earnings per share of $1.36. S&P's 12-month target price remains $38.

Alliance Capital (AC ): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Robert McMillan

Alliance reported assets under management at the end of August at $434 billion, vs. $427 billion at the end of July. Given S&P's expectations that the stock market will rise further, S&P thinks Alliance's assets under management and investment advisory income should benefit. S&P is increasing the earnings per share estimates to $1.98, from $1.95, for 2003, and to $2.48, from $2.30, for 2004. At 18 times S&P's 2003 estimate, Alliance is at a sizable discount to other equity-oriented asset managers that S&P follows. S&P expects the shares to rise as the stock market and assets under management increase. Finally, S&P's 12-month target price is $40.

IndyMac Bancorp (NDE ) and Washington Mutual (WM ): Maintains 5 STARS (buy); Countrywide Financial (CFC ): Maintains 4 STARS (accumulate)

Analyst: Erik Eisenstein

Mortgage-related stocks are weak Wednesday after industry leaders Washington Mutual and Countrywide Financial reported dramatically lower mortgage activity on Tuesday, and commercial bank National City issued mortgage-related earnings warning Thursday (As a result, S&P upgraded National City's ranking, based on shares trading at a meaningful discount to peers.) While the recent rapid rise in mortgage rates is challenging from a hedging and operational standpoint, S&P believes this challenge will be largely over by 2004. S&P sees valuations of the 2004 earnings per share estimates as increasingly compelling.

Fannie Mae (FNM ): Maintains 4 STARS (accumulate) and Fredde Mac (FRE ): Maintains 2 STARS (avoid)

Analyst: Erik Eisenstein

Treasury Secretary Snow and Housing and Urban Development Secretary Martinez testified Wednesday before the Senate on regulation of government-sponsored enterprises Fannie Mae and Freddie Mac. Much of what they had to say was consistent with previously published reports. Specifically, they both called for a new, tougher regulator and indicated a willingness to consider moving that regulator from HUD to the Treasury. Still, they stopped short of recommending changes that S&P would view as more substantive, like higher capital requirements, or charter reforms. S&P views this as a slight positive for these enterprises.

Liberty Media (L ): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Tuna Amobi

With 2003 revenues and operating income at 100%-owned Starz Encore previously guided to a mid single-digits decline, Liberty Media now sees teh unit's 2004 operating income down too. Liberty Media cited higher programming expenses with added cost of movie titles, and inability to pass on such hikes to consumers amid a contract dispute with Comcast. With litigation settlement not in sight, this one-two punch could have a more severe impact than S&P previously believed. But the cash flow effect should be softened by the solid Discovery network and the newly acquired QVC home-shopping network. S&P's new 12-month target price is $11.

3Com (COMS ): Reiterates 3 STARS (hold)

Analyst: Megan Graham Hackett

Today 3Com announced plans to outsource all of its manufacturing and realign its product development and supply chain. 3Com plans to complete it outsourcing efforts within six months. The company, however, did not quantify the cost savings related to the actions. S&P expects it to do this when the company reports earnings next week. S&P applauds the actions, noting that 3Com's gross margins are well-below peers. No change to S&P's estimates. With shares trading near cash and book value levels, S&P views the stock as worth holding.

Texas Instruments (TXN ): Maintains 5 STARS (buy)

Analyst: Thomas Smith

Texas Intstruments guided revenue to the top half of the prior range. Chip demand is improving in all main markets, which supports S&P's belief that a cyclical industry upturn is gaining traction. S&P is maintaining the 2003 $0.38 earnings per share estimate (before a 13 cents per share gain on the sale of Micron Technology shares), and is raising the 2004 earnings per share estimate to 80 cents, from 75 cents. Shares trade below the midpoint of their historical annual range for price to tangible book. Based on a blend of forward p-e and price-to-book analyses, S&P is raising the 12-month target price to $34 a share, from $25.

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