Still Hold WorldCom

Also: Analysts' opinions on Ross Stores,, Louisiana-Pacific

WorldCom (WCOM ): Still 2 STARS (avoid)

Analyst: Todd Rosenbluth

The shares are up 8% on news Worldcom Inc. will eliminate the tracking stock structure of WCOM Group and MCI Group. This is expected to save $284 million in dividend payments. The conversion of MCIT shareholders will occur on July 12. The long-anticipated move is a modest attempt to quash liquidity concerns. We at S&P expect worries to continue on its high debt load even with near-term asset sales. With a persistent cash crunch, a wide-ranging SEC probe, and sluggish long-distance market leading to a challenging operating environment, WCOM shares remain quite risky regardless of structure.

Ross Stores (ROST ): Still 4 STARS (accumulate)

Analyst: Maureen Carini

First quarter EPS was $0.59, vs. $0.43, in line with estimates. Total sales grew 22% on a solid 10% increase at same stores. Sales were particularly strong in the mid-Atlantic, Colorado, Texas, and Florida markets. New Southeast markets were also better than expected. Juniors and home categories continued to drive growth. Gross margin rise was offset by higher bonus accrual. Inventories were up 11%, reflecting 12% square footage growth. ROST is on track to open 55 new stores this year. We still see fiscal year 2003 (Jan.) EPS of $2.30. With 3-year EPS growth rate seen at 15%-plus, ROST is attractive at 18 times our estimate. (CCBL ): Downgrading to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Ari Bensinger

The company does not anticipate generating further revenue from struggling Adelphia Communications. As a result, it lowers June quarter sales guidance to $60-$65 million from $65-$75 million, and EPS forecast to $0.02-$0.04 from $0.04-$0.06. Still, we at S&P see increased sales from AT&T Broadband somewhat offsetting the Adelphia revenue absence. We are lowering our fiscal year 2002 (June) EPS estimate to $0.04 from $0.07, and putting our fiscal year 2003 EPS estimate under review. The balance sheet is solid with over $3 cash per share, and a relatively low 18% debt to total equity ratio. At 1.2 times fiscal year 2002 sales estimate, below peers, okay to hold the stock.

Louisiana-Pacific (LPX ): Downgrading to 1 STAR (sell) from 2 STARS (avoid)

Analyst: Bryon Korutz

Applaud recent actions to sell under-performing units to reduce debt, but we at S&P are not attracted to a company that will remain focused on oriented-strand board, which is a commodity product with oversupplied markets. We remain skeptical that LPX can sell all assets identified (some high-cost) to raise $600-$700 million for reducing debt. With oriented-strand board and lumber prices under pressure, we are cutting our 2002 EPS estimate to $0.10 from $0.12. The stock of this commodity-based forest products company is costly at 21 times our optimistic 2003 EPS estimate of $0.55.

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