Cadence Design Raised to Accumulate

S&P's analyst sees upside potential in the stock. Plus: Opinions on Tenet Healthcare and Read-Rite

Tenet Healthcare (THC ): Reiterate 5 STARS (buy)

Analyst: Robert Gold

FY 01 (May) Q2 EPS surged 26% to $0.54, three cents ahead of our above-consensus projection. Same- facility admissions up 4.2%, at high end of expectation, same-store net patient revenue/admission gained 6.2%. EBITDA margins surprised on the upside at 18.4% vs. 16.9%. Strong operating cash flow used to retire $377M debt in Q2. Hope for guidance on AM conference call regarding impact of recent Medicare rate relief. Boosting FY 01 estimate. $0.15 to $2.25, FY 02 $0.15 to $2.60. Expect THC to build on stellar '00 gains regardless of economic environment.

Intimate Brands (IBI ): Downgrade to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Thomas Graves

Disappointed by 3% decline in comparable-store sales during recent 5-week period mostly in December. also disappointing is co.'s guidance toward Q4 EPS of $0.44-$0.48 vs. $0.55 year-ago, and toward modest profit growth for FY 02 (Jan.). Lowering our FY 01 (Jan.) EPS estimate to $0.87, from $1.07, FY 02's to $0.96, from $1.25. Like co.'s brand name strength, high ROE and free cash flow. But in light of recent sales weakness and lowered EPS estimates, do not advise adding to stock positions.

Read-Rite Corp. (RDRT ): Reiterate 3 STARS (hold)

Analyst: Jim Corridore

Co. says revenues grew 30% in Q4 and notes that it will beat street consensus EPS estimate of $0.02 when it reports earnings on 1/24. news encouraging, but feel RDRT competing in a tough environment, with risk of slowing economy and limited PC growth. Co. indicates it aims to grow by gaining market share, which could be a precursor to pricing pressure. Shares have come down sharply from highs in early Fall when RDRT announced formation of Optics division. Feel stock fairly valued in current environment.

Cadence Design (CDN ): Upgrade to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Thomas Smith

Industry outlook improving for leading supplier of electronic design automation software. CDN should do well as design cycle perks up for shift to 0.15 and 0.13 micron technologies in semiconductor industry.. Co.'s transition to new subscription license model nearly complete. Shares now at 31X our '01 EPS est. of $0.85, above broad market. However, we think there is room for P/E multiple to rise toward 35X. Some potential for upside earnings surprise. Anticipate moderate share-price outperformance in 2001.

eBay Inc. (EBAY ): Reiterate 4 STARS (accumulate)

Analyst: Scott Kessler

Despite yesterday's outage. Main site was down for almost 11 hours, due to failures affecting primary, back-up systems. Problems that led to site's crash were worsened by decision to delay replacement of certain hardware until after busy holiday shopping season.. But even though outage reminiscent of service disruptions in August 1999, website for last 4 quarters has achieved greater than 99% uptime. With hardware upgrades expected soon, we are confident that EBAY will maintain strong service record. Accumulate nice contrary play in weak sector amid soft economy

Bear Stearns (BSC ): Reiterate 4 STARS (accumulate)

Analyst: Michael Schneider

Posts FY Q4 EPS of $1.36, vs. $1.32, $0.25 better than expected. Higher global clearing services revenues (up 20%) and capital markets revenues (5%) offset lower wealth management revenues (down 9%). Compensation expenses creeping up, reflecting intense competition for labor and BSC's expansion efforts. Firm's move into profitable and growing European investment banking market continuing. See FY 01 (Nov.) EPS at $6.25. Modest P/E in relation to peers and company's status as long-term takeover candidate make BSC shares attractive.

Philip Morris (MO ): Reiterate from 5 STARS (buy)

Analyst: Richard Joy

Believe recent decline unwarranted, as tobacco stocks generally outperform during periods of Fed easing and economic uncertainty. View new Republican administration as a further positive, as it signals less onerous regulatory/litigation environment. Valuation compelling at less than 10X our $4.15 EPS est. for '01, given our expectation of 12-14% EPS growth for next 3-5 years. Solid operating results, earnings growth exceeding the S&P 500 and planned IPO of Kraft food business make shares a worthwhile purchase.

Plantronics Inc. (PLT ): Downgrade to 3 STARS (hold) from 5 STARS (buy)

Analyst: Markos Kaminis

Downgrade based on recent price rise and increased near-term risk related to end market weakening. Troubling near-term obstacles include slower PC sales and business investment. Furthermore, PLT's customer service market is likely to be impacted by slowing economy. reducing our FY 02 (Mar.) EPS est. to $1.86, from $1.91. With shares now at 28X our revised calendar '01 EPS est. of $1.78, compared to 21% long-term growth projection, think it wise to temper bullishness. Still expect long-term holders to benefit from telecom- and PC-related product growth.

J.P. Morgan Chase (JPM ): Upgrade to 5 STARS (buy) from 3 STARS (hold)

Analyst: Stephen Biggar

See stock benefiting from more favorable rate environment, and from greater comfort level with merger as cost synergies and cross-selling capabilities likely to be greater than originally planned. Leadership rank in several markets and scale advantages adds to complementary strengths of combined company. Like new concentration in growth areas of wealth management, European M&A. Expect recent shortfall in capital markets businesses to be overlooked as market sees combined company potential, more accommodative Fed policy.

Toys "R" Us (TOY ): Upgrade to 3 STARS (hold) from 2 STARS (avoid)

Analyst: Thomas Graves

View co.'s U.S. holiday season toy sales as bright spot in generally weak retail environment.. Comp-stores sales at co.'s U.S. stores rose 3.5%, stronger than expected. Before estimated $0.50 loss per share from Internet business, and gain from asset sales, upping our FY 01 (Jan.) EPS estimate to $1.63, from $1.55. Excluding Internet business, raising our FY 02 estimate to $1.80, from $1.67.. See TOY making favorable moves to improve U.S. toy stores format, product mix. But strength now in share price adequately reflects today's good news.

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