Still Avoid Goodyear Tire

Goodyear Tire (GT ) : Maintains 2 STARS (avoid)

Analyst: Efraim Levy

Citing cost cuts and improved international operations, Goodyear sees stronger second quarter earnings per share than earlier expected. S&P is raising the second quarter EPS estimate to $0.13 from $0.08, and upping the full 2002 EPS to $0.14 from $0.08. Although Goodyear's North American results were disappointing, most other regions saw operating margin improvement. The strength of the North American original equipment commercial tire business is unsustainable, since it reflects sales ahead of regulatory changes. Domestic market share seems to have fallen recently, but the weaker dollar should help results.

Chico's FAS (CHS ): Maintains 5 STARS (buy)

Analyst: Tuna Amobi

At a Thomas Weisel Growth Forum, the company maintained an upbeat stance and expectation of 5%-9% comps growth. Fresher products and revamped merchandising should deliver solid revenue growth, outweighing higher marketing spending and software upgrade costs. Chico's targets 385 store count by the end of fiscal 2003 (Jan.) vs. 326 now, and ultimately plans a 600-store base, funded internally. Testing of new concept stores for moderate income women will start in 2003. At below its $48-$49 intrinsic value, based S&P's discounted cash flow model, Chico's shares are attractive.

Advanced Micro Devices (AMD ): Downgrades to 2 STARS (avoid) from 3 STARS (hold)

Analyst: Thomas Smith

The chip maker warned of much lower than expected revenues as PC sales weaken in the U.S. and Europe. Pricing for microprocessors is weak. Inventories are building. The company is likely losing share to Intel. The bright side is that flash memory sales are rising and manufacturing upgrades are continuing. Like Intel, S&P sees early signs of a soft back-to-school season, but sees a stronger second half. S&P is reducing the $0.01 2002 earnings per share estimate to a loss of $0.60. S&P also is lowering the $0.55 2003 estimate to $0.50. S&P sees the downside risk limited to $7.20 based on prior cycle bottoms near the 0.7 tangible book multiple.

Oracle (ORCL ): Maintains 4 STARS (accumulate)

Analyst: Jonathan Rudy

The company posted May quarter earnings per share of $0.14 vs. $0.15, before a charge -- $0.02 above estimates. Revenues declined 16%, which was also better than estimates. Oracle experienced particular weakness in the Americas region and Japan. However, operating margin improved nicely to 44%, from a year ago's 39%. S&P is lowering the fiscal 2003 (May) EPS estimate to $0.42, from $0.45. With return on equity over 40%, operating margins of about 40%, and more than $6 billion in cash and investments with little debt, S&P would still accumulate the database leader, which is trading at a discount to its intrinsic value.

Apple Computer (AAPL ): Maintains 3 STARS (hold)

Analyst: Megan Graham Hackett

The computer company sees a June quarter shortfall. Apple sees revenues of $1.4-$1.45 billion, vs. the prior guidance of $1.6 billion, and earnings per share of $0.08-$0.10, vs. $0.11 guidance, as a sales shortfall offset higher gross margin. Apple cited soft demand in consumer and creative/professional markets, as well as weakness in Japan and Europe. Many companies already noted that PC demand has pulled back from its robust March quarter levels, so a shortfall is not a surprise. S&P is cutting the fiscal 2002 (Sept.) estimate $0.04 to $0.47. At a price-to-sales ratio of one -- near peers -- and with $12 a share in cash and equivalents, S&P says it's O.K. to hold Apple.

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