Downgrading P&G to Hold

Correction: An earlier version of this story incorrectly stated that S&P upgraded Procter & Gamble. S&P downgraded the stock.

Procter & Gamble (PG ), Clorox (CLX ), Dial (DL ): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Howard Choe

Coupled with sector rotation out of defensive stocks, full valuation and the devaluation of the Argentine peso currency is likely drag on these stocks near term. While widespread contagion in Latin America is not believed likely, S&P believes fears of residual pressures on regional currencies will persist. S&P is maintaining opinions on Avon (AVP ), which have a 3 STARS (hold) ranking, and Kimberly-Clark (KMB ), which has a 2 STARS (avoid) ranking.

Lucent Technologies: Maintains 3 STARS (hold)

Analyst: Ari Bensinger

The technology giant named Eastman Kodak's president & COO Patricia Russo as new CEO, replacing Henry Schacht who has been interim CEO since October 2000. Russo worked at AT&T/Lucent for 20 years before joining Kodak in April 2001. Being a former CEO of the service provider division, Russo understands industry dynamics and company culture. Given Lucent's refocus on top service providers, S&P sees Russo as a good fit. S&P also believes Lucent, with its large customer base, is well positioned to recover during the next spending upturn. At 1.5 times S&P's fiscal 2002 (Sept.) sales estimate, in line with peers, Lucent is fairly valued.

Great Atlantic & Pacific (

GAP

): Maintains 3 STARS (hold)

Analyst: Joseph Agnese

The grocery chain posted November quarter EPS of $0.08 before charges, vs. a loss of $0.38, $0.01 above Street. Total sales were up 4.0%, comparable-store sales rose 3.3%. The results exclude $2.49 , in charges related to a previously announced asset disposition program. Great S&P is on schedule with the majority of 39 stores expected to be closed by the end of fiscal 2002 (Feb.). The program should result in annual EPS benefit of about $0.35. S&P expects continuing costs associated with supply-chain strategic initiatives of about $0.35 per share in Q4, and is Keeping the fiscal 2002 estimate of $0.02 loss per share. The 'hold' ranking is based on turnaround progress.

Eastman Kodak (EK ): Maintains 3 STARS (hold)

Analyst: Richard Stice

Patricia Russo is resigning after only nine months to become CEO of Lucent Technologies. Chairman and CEO Daniel Carp will re-assume roles as the search begins for a replacement. The news is disappointing, particularly as Kodak deals with slumping demand, realignment of business units. However, S&P believes Mr. Carp is more than capable of handling the role on an interim basis. While an announcement may delay completion of Kodak's turnaround plan, with shares trading at discount to peers and the broader market on a price-earnings basis, Kodak is okay to hold.

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