S&P: Still Buy J.C. Penney

Also: Analysts' opinions on Cadbury Schweppes, Delphi, and other stocks

J.C. Penney (JCP ): Reiterates 4 STARS (buy)

Analyst: Jason Asaeda

October-quarter same-store sales and direct sales are tracking in line with our 2.0% and flat growth forecasts. We see Penney up to the task of serving the needs of Middle America, based on what we view as affordable, trend-right merchandise and multi-channel shopping convenience. But we believe market concerns about the impact of higher energy prices on consumer spending will continue to weigh on the share price. We are raising our fiscal 2006 (ending January) operating EPS estimate by 8 cents to $3.43, based on planned share buybacks. But, we are lowering our target price by $7 to $52 on discounted cash-flow-based valuation.

Cadbury Schweppes (CSG ): Reiterates 3 STARS (hold)

Analyst: Jelena Karafotias

The ADRs were down Friday as Cadbury says it expects operating margin expansion in 2005 to be below its 50-75 basis-point target because of higher energy and packaging costs, hurricane disruptions, and growth-related investments. It expects revenue growth near the top of its 4%-6% target range. Our current 2005 estimates are for 30 bps wider operating margin and 5% organic sales growth. We continue to believe that increased competitive activity in the U.S. will impact Cadbury for the rest of 2005. We are keeping our 2005 earnings per ADS estimate at $2.44 and our 12-month target price at $40.

Delphi Corp. (DPH ): Reiterates 3 STARS (hold)

Analyst: Efraim Levy, CFA

We are lowering our 12-month target price to $2.50 from $5.50. We believe the chance of a Delphi bankruptcy filing is now more likely than not. Even so, we believe there is still time for agreements with major customer General Motors (GM ) and the UAW that could restore profitability. We think Delphi is positioning itself for a possible bankruptcy filing but would prefer negotiated agreements. We believe a filing decision will occur close to Oct. 17, when bankruptcy rules become less favorable to debtors. Talks with GM and UAW could be of key importance for Delphi shares.

Hutchison Telecom (HTX ) : Cuts to 3 STARS (hold) from 5 STARS (strong buy)

Analyst: David So and Kenneth Leon

Following a 20% gain in the share price over the past month, we believe the American Depositary Shares are near fair value. Nonetheless, we believe Hutchison will show strong wireless subscriber growth, especially from its Indian joint venture. We view the prior acquisition of three Indian wireless carriers as favorable for the company's future growth prospects, and we believe the potential initial public offering of Hutch India in the first half of 2006 may be a positive for the American Depositary Share price. We are raising our 12-month target price by $1 to $22, based on our sum-of-parts valuation, using discounted cash flow to value each business segment.

Chubb (CB ) : Reiterates 4 STARS (buy) Opinion

Analyst: Cathy Seifert

We are lowering our third quarter and full 2005 earnings per share estimate by $1.05 each, to 75 cents and $7.25, respectively, to reflect the incremental impact from Chubb's projected $390 million estimated after-tax claims from Hurricane Katrina. This level of losses are about in line with our expectations, given the company's presence in the affected areas. We believe Chubb's favorable underlying claim trends and its ability to garner price increases in the wake of this storm will provide the shares with a catalyst. Our $100 target price assumes Chubb trades at 12 times our $8.40 2006 earnings per share estimate, a premium to peers.

Mellon Financial (MEL ) : Maintains 4 STARS (buy) Opinion

Analyst: Mark Hebeka, CFA

Mellon Investor Services, a transfer-agent unit of Mellon, received a Wells Notice from the Philadelphia District Office of the Securities and Exchange Commission regarding disclosure practices to its transfer agency clients from 2001 to late 2004. The investigation concerns the receipt of fees from a search firm that performs in-depth searches for lost shareholders. At this point we do not believe this matter will have a material impact on Mellon, as the company has stated that total fees received from the search firm totaled approximately $5 million. Our 12-month target price remains $35.

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