Morgan Stanley Raised to 'Buy'

Morgan Stanley Dean Witter (MWD ): Upgrades to 5 STARS (hold) from 4 STARS (accumulate)

Analyst: Robert McMillan

Morgan Stanley should benefit nicely from a rebounding economy. The company's brokerage and asset management businesses should be helped by a stronger stock market. The Discover Card business, which has weathered the recession reasonably well, should benefit from increased consumer spending and benign interest rates. S&P feels that the shares, trading at 15.9 times its fiscal 2002 $3.45 EPS estimate, a discount to peers, are very attractive given improving market conditions and Morgan Stanley's strong market position in its diversified businesses.

Merrll Lynch (MER ): Reiterates 4 STARS (accumulate)

Analyst: Robert McMillan

Merrill says it is considering an offering of up to $1 billion of senior floating-rate zero-coupon notes that would be convertible into Merrill common stock. The proceeds would be used for general corporate purposes. Although this offering would bve a source of dilution, S&P would view the possible transaction positively, since it would provide Merrill with relatively inexpensive funding. Share are trading at 16 times the $3.25 2002 EPS estimate and with improving market conditions, S&P feels that Merrill shares still have additional upside potential.

Celgene (CELG ): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Frank DiLorenzo

Celgene says it has delayed plans to a file supplemental application for the approval of Thalomid to treat refractory multiple myeloma patients, and will conduct a new trial to gain approval in early stage patients. The filing will not likely occur for two more years. S&P considers this announcement as negative, because it was assumed that approval could drive sales in earlier stage patients and off-label use in other indications. S&P is lowering its 2002 estimate to $0.15 from $0.34, and is cutting 2003's EPS estimate to $0.45 from $0.50. On the net present value of Celgene's products and pipeline, S&P considers the shares fairly priced.

Affiliated Computer Services (ACS ): Adding coverage with 4 STARS (accumulate)

Analyst: Richard Stice

The provider of outsourcing and data processing services shows stable revenue and earnings growth. Nearly 90% of fiscal 2001 (June) revenues are recurring. The outsourcing trend is building momentum as companies shift their focus to core competencies. S&P sees fiscal We 2002 EPS at $1.77, and sees fiscal 2003's at $2.15. With favorable growth prospects and shares trading at a discount to peers on price-earnings, price-earnings-to-growth and a price-to-sales basis, S&P views Affiliated Computer Services as attractive.

Ann Taylor Stores (ANN ): Maintains 4 STARS (accumulate)

Analyst: Maureen Carini

Excluding charges in both periods, the company posted fourth quarter EPS of $0.34 vs. $0.18, a penny above estimates. Total sales grew 8.1%, on a 2.1% gain in same-store sales. S&P is encouraged by the 8.1% gain at its Ann Taylor Loft units. Gross margin benefited from better sales of full priced merchandise, but selling, general and administrative expenses were higher to support new store growth. Inventories are in good shape and S&P is seeing a good response to Spring offerings. February same-store sales were better than expected. S&P is raising its fiscal 2003 EPS estimate by $0.30, to $1.92. Given recent signs of a turnaround, Ann Taylor is attractive at 21 times S&P's estimates.

Conseco (CNC ): Downgrades 2 STARS (avoid) to 3 STARS (hold)

Analyst: Catherine Seifert

S&P sees the shares of this troubled insurer continuing a downward spiral amid reports that recently hired CFO Chokel has resigned. Numerous other reports indicate Conseco has until March 31 to present a plan to auditors of how it intends to meet obligations on its $6.1 billion in outstanding debt, or face "qualified" opinion on its financial statements. S&P views Conseco's financial situation as extremely fragile, and would not be surprised to see a bankruptcy filing in near future.

Guidant (GDT ): Maintains 4 STARS (accumulate)

Analyst: Robert Gold The company announced that preliminary results in its clinical trials of an actinomycin-D eluting coronary stent have shown no effect in preventing vessel reclosure. While Guidant may participate in the drug eluting stent market through it's partnership with privately-held Cook Inc., the news is a significant negative. Conversely, the development bodes well for Johnson & Johnson given its clinical success in the drug-coated stents.

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