S&P Upgrades Alltel

Omnicom Group (OMC ): Downgrades to 3 STARS (hold) from 5 STARS (buy)

Analyst: William Donald

Omnicom is plunging after a Wall Street Journal article questioned the validity of reported income statements, raising questions about accounting for acquisitions, valuation and accounting for Internet investments, potential hidden liabilities regarding minority interests, and why cash flow has lagged profit gains, plus other matters. Omnicom has countered that it complies totally with SEC requirements, but S&P believes that uncertainties surrounding these issues will keep a cloud over the stock for at least several months.

Argosy Gaming (AGY ): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Michael Santicchia

The stock recently sold off on the negative impact of the gaming tax increase recommended by the Illinois legislature. Argosy shares continue Wednesday to be under pressure as investors anticipate further potential legislation in the state of Indiana containing tax hikes without corresponding provisions designed to offset the increased burden. Argosy's elimination of leased slot machines at its two Illinois casinos in an attempt to generate savings doesn't seem enough to support shares.

Alltel (AT ): Upgrades to 5 STARS (buy) from 4 STARS (accumulate)

Analyst: Todd Rosenbluth

At a CIBC communications conference, Alltel said the acquisitions of properties from Verizon and Centurytel are progressing smoothly and should close in the third quarter. The company has a strong history of generating positive free cash flow following its deals. S&P is raising the 2002 EPS estimate by $0.03, to $3.31, and is raising 2003's by $0.05, to $3.56. Despite weakness in the telecom sector, S&P believes Alltel is attractive, with limited pricing pressures, an above average return on investment, and at a price below its rural peers on a price-earnings and enterprise value/EBITDA basis.

Hispanic Broadcasting (HSP ): Upgrades to 4 STARS (accumulate) from 3 STARS (hold) Analyst: Howard Choe

Hispanic Broadcasting shares are up 13% as the company agreed to a stock swap transaction worth about $3.5 billion. The price for Hispanic Broadcasting is very attractive at 40 times S&P's estimate of 2002 EBITDA. S&P thinks the deal is likely to be approved by regulators and shareholders and will close by year end. If approved, Hispanic Broadcasting shareholders will receive 0.85 shares of Univision for each Hispanic Broadcasting share. With a healthy premium and combination of the powerhouse Spanish language media firm in Univision, S&P views the transaction as favorable.

Siebel Systems (SEBL ): Maintains 5 STARS (buy)

Analyst: Jonathan Rudy

At a Bear Stearns Technology Conference Tuesday, Siebel's CFO indicated that the second quarter was looking to be roughly flat with the first quarter, which was a challenging quarter for the software sector. However, it is still early in the quarter for most enterprise software providers that close a significant portion of business in the third month of each quarter. While it appears unlikely that technology spending will recover significantly in the near term, S&P believes that financially strong market leaders like Siebel are attractive at notable discounts to fair value.

Monsanto (MON ): Downgrades to 2 STARS (avoid) from 3 STARS (hold)

Analyst: Joseph Agnese

Monsanto lowered its second quarter operating earnings per share guidance by $0.30 to $1.10-$1.15, and lowered the full year guidance to $1.50 from $2.23-$2.27. The full year reduction reflects planned steps to lower risk exposure and working capital in Latin America. The second quarter reduction reflects a $0.20 shift to the third quarter caused by planting delays amid wet weather, and $0.10 for steps to improve Latin American markets. S&P is lowering the 2002 EPS estimate to $1.50 to match the lowered guidance. At 18 times that estimate, with significantly more risk than peers, S&P thinks the shares are unattractive.

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