Upgrading Conseco to Hold

Also: analysts' opinions on DoubleClick and Tyson. Plus others

Conseco Inc. (CNC ): Upgrades to 3 STARS (hold) from 2 STARS (avoid)

Analyst: Catherine Seifert

Shares are sharply down on Tuesday on very heavy volume after the company reduced guidance for 2001 operating EPS from $1.00 to $0.80-$0.95. Conseco attributed reduced guidance to slowdown in variable and equity-indexed annuity sales amid difficult equity market conditions. Despite the upgrade, S&P shares the market's concerns that margins in other lines, like manufactured housing financing and long-term care insurance, may also come under more pressure.

DoubleClick (DCLK ): Maintains 5 STARS (buy)

Analyst: Scott Kessler

On Tuesday morning DoubleClick said CFO Stephen Collins is stepping down and being replaced by VP Finance/Operations Bruce Dalziel. DoubleClick is somewhat weak on this news, but S&P thinks the selloff is unwarranted. The transition to Dalziel has been underway for some six months, during which he has been acting internally as CFO of two of DoublClick's three primary business segments. Dalziel previously was the CFO of Prudential Insurance. Collins will work on special projects through Q1 2002. S&P recommends investors buy DoubleClick, a clear leader in online ad space with recent $6.21 per share in cash.

Textron (TXT ): Maintains 3 STARS (hold)

Analyst: Robert Friedman

The $13 billion conglomerate, a maker of Bell helicopters and Citation business jets, is near a pact to sell its auto-trim division for $1 billion in cash and assumed debt and $335 million in stock. S&P thinks the price is modest at five times Textron's 2000 operating earnings. Textron's auto parts-making unit is a low-margin, commodity business with little growth prospects or pricing power. But most of Textron's remaining units still cater to slow-growing, and/or highly cyclical markets. The company is trading at only a slight discount to its unchanged estimated $58-$68 fair value range.

Procter & Gamble (PG ): Reiterates 4 STARS (accumulate)

Analyst: Howard Choe

Before charges, P&G posted June-quarter EPS of $0.60 vs. $0.55, in line with S&P's estimate. Sales growth was 1%, as expected. Healthcare segment sales are showing continued strength, up 14%. Foreign exchange had a 3% adverse impact. Operating margin rose 140 basis points, boosted by an impressive 190 basis point reduction in selling, general and administrative costs. P&G is gaining market share in key categories; the company is more in tune with market pricing. S&P expects further gains with new product launches in 2002. At 22 times S&P's fiscal 2002 (June) EPS estimate of $3.32, P&G shares are at a meaningful discount to its historical 20%-30% premium to the market.

Darden Restaurants (DRI ): Reiterates 4 STARS (accumulate)

Analyst: Karen Sack

Shares are down on weak July same-store sales, which are up only 1%-2% at Red Lobster with guest counts down 3%, and flat at Olive Garden vs. a year ago on a 1% decline in guest counts. Darden is up against difficult comparisons from last year. Consumer spending for eating out has slowed somewhat, but S&P anticipates a modest pickup as some tax rebate checks are spent eating out. S&P is maintaining the projected 16% rise in fiscal 2002 (May) EPS to $2.15, boosted by the rollout of Bahama Breeze and Smokey Bones BBQ Sports Bars.

IBP Inc. (IBP ) and Tyson Foods (TSN ): Reiterates 3 STARS (hold)

Analyst: Phillip Seligman

The Tyson acquisition of IBP is likely to close in two months. S&P sees combined 2002 revenues of $25.7 billion and $0.90-$1.00 EPS, based on new accounting rules effective in 2002, or $0.70-$0.85 EPS using the current rules. S&P's estimated results includes $50 million of synergy savings, with an annual $200 million in savings likely in three years. Divestitures, likely minor, will be announced in 30-60 days. S&P says keep both stocks, and believes Tyson's price reflects the discounted value of the combined company. S&P thinks the combines companies will benefit from synergy savings, economies of scale, joint marketing, and an improved sales mix.

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