Fannie Mae (FNM ): Reiterates 3 STARS (hold), and Freddie Mac (FRE ): Reiterates 2 STARS (avoid)

Analyst: Erik Eisenstein

Federal Reserve Chairman Greenspan testified before the Senate on Fannie Mae and Freddie Mac's economic role. S&P already viewed Chairman Greenspan as a critic. S&P doesn't think a workable consensus exists to reduce Fannie and Freddie's implicit subsidy, though a stronger one exists for tighter regulation, possibly with the power to raise capital requirements. As such, it's a slight positive for the companies, in S&P's view, that he chose not to focus on the ongoing Freddie Mac controversy, which S&P would see as a call for immediate action, and instead focused on the less politically viable subsidy issue.

Home Depot (HD ): Maintains 4 STARS (accumulate)

Analyst: Yogeesh Wagle

Home Depot posted January-quarter earnings per share of 42 cents, vs. 30 cents, which is 3 cents above S&P's estimate. Sales rose 14.5%, driven by 7.6% same-store sales growth on higher average ticket and customer transactions. S&P is raising the fiscal 2005 (Jan.) earnings per share estimate to $2.16, from $2.11. S&P believes the shares are undervalued at 16 times S&P's fiscal 2005 estimate, below the S&P 500 as well as other segment-leading peers. S&P thinks the company has struck a better balance between expansion and improving productivity in its existing stores. Based on S&P's discounted cash-flow-analysis derived intrinsic value, S&P's 12-month target price is $41, or 19 times S&P's fiscal 2005 estimate.

Host Marriott (HMT ): Downgrades to 1 STAR (sell) from 3 STARS (hold)

Analyst: Roger Mathis

Host Marriott posted a fourth-quarter loss of 7 cents, vs. a 19 cents loss, beating S&P's 11 cents loss estimate. Results were boosted by a $212 million insurance settlement for the World Trade Center property loss. Revenue per available room fell 1%, contrary to industry trends. S&P expects Host Marriott to underperform peers in 2004 and remain in violation of debt covenants for the full year. As a result, S&P sees no reinstatement of common dividends and S&P sees the possible suspension of preferred dividends. Shares have recently risen to pre-Sept. 11 prices, a level S&P thinks is unjustified. S&P's 12-month target price drops to $9, from $12.

Photronics (PLAB ): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Richard Tortoriello

Photronics announced that its CEO, Dan Del Rosario, is resigning to pursue personal interests. Del Rosario is also stepping down from his position as a director. Deno Macricostas, the company's chairman, is assuming the role of CEO until a successor is found. S&P believes Photronics has been executing well and notes that the shares, at 1.7 times sales, are below their historical average of 2.3 times sales. However, given the uncertainty stemming from the CEO's resignation, S&P is downgrading its opinion to hold. S&P is lowering the target price to $24, from $30, reflecting a multiple of 2.0 times sales.

Triad Hospitals (TRI ): Maintains 5 STARS (buy)

Analyst: Frank Connelly

Triad posted fourth-quarter operating earnings per share of 49 cents, vs. a year-ago's 47 cents, a penny ahead of S&P's forecast. Fourth-quarter sales of $1.05 billion were $30 million ahead of S&P's estimate, and up 14% year to year, on an 8.2% volume gain, and contributions from acquisitions. Well-controlled labor costs partially offset higher operating expenses from acquired facilities and an increase in bad debt expense. S&P still sees 2004 operating earnings per share at $2.34, and continues to expect double-digit earnings per share gains for Triad over the long term. S&P's $41 12-month target price assumes that the shares trade at 18 times S&P's 2004 earnings per share estimate.

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