S&P Likes Top Broadcasters Despite Market Pressure

Clear Channel Communications (CCU ): Reiterates 5 STARS (buy)

Univision (UVN ): Maintains 4 STARS (accumulate)

Hearst-Argyle (HTV ): Maintains 4 STARS (accumulate)

Emmis (EMMS ): Maintains 4 STARS (accumulate)

Lamar (LAMR ): Maintains 4 STARS (accumulate)

S&P thinks concerns about telecom, leverage, and the pace of advertising recovery have overly punished broadcasting stocks. S&P's conservative estimate for broadcast ad growth is 4%. Upfront sales were strong, as were recent pacings. Valuation measures are shifting to earnings per share and free cash flow, away from EBITDA. S&P views the leverage as manageable and aided by the recovery.

CNF (CNF ): Upgrades to 3 STARS (hold) from 2 STARS (avoid)

Analyst: Richard O'Reilly, James Corridore

The company now sees second quarter earnings per share at $0.34-$0.39, well above S&P's previous estimate, and versus a year ago's $0.17. The company notes cost controls at its trucking and Emery air freight units, and slightly better volumes than anticipated at all units. S&P is raising the 2002 EPS estimate to $1.40 from $1.24, based upon the second quarter guidance. Although CNF's stock is trading at a premium to peers, S&P now sees it as an average performer, based on the company's improving prospects.

General Communication (GNCMA ): Downgrades to 2 STARS (avoid) from 3 STARS (hold)

Analyst: Todd Rosenbluth

With major customer Worldcom (16% of 2001 revenue) facing continued operating challenges, S&P is reducing its estimates for Alaskan telephone carrier General Communication. Though General Communication receives traffic from Sprint as well as Worldcom, S&P sees some call traffic shifting to the competing AT&T network. S&P is lowering its 2002 earnings per share estimate by $0.04 to $0.19 and cutting 2003's by $0.06 to $0.26. Although General Communication's ratio of enterprise value to EBITDA is appropriate vs. peers, S&P would avoid the stock amid uncertainty about its long distance business.

Motorola (MOT ): Maintains 3 STARS (hold)

Analyst: Ari Bensinger

Motorola expects to meet or slightly exceed its June quarter guidance of a $0.04 loss. The company also confirmed that it remains on track to return to profit in the September quarter. The announcement mirrors earnings confirmation given at a Bear Stearns technology conference just two weeks ago. S&P believes the handset and semiconductor divisions are performing above expectations, and forecasts 2002 earnings per share of $0.06 -- above consensus. Despite a weak communications market, Motorola is worth holding as shares trade at an enterprise value of 1.6 times S&P's 2002 sales estimate, a slight discount to peers.

Constellation Brands (STZ ): Maintains 5 STARS (buy)

Analyst: Richard Joy

The company posted May quarter earnings per share of $0.40 vs. $0.33, $0.03 better than expected. Sales rose 9% on acquisitions, and strong 7% internal growth was led by imported beer and U.K. wholesale businesses. Margins widened on higher volumes and mix improvements. S&P is keeping the August quarter EPS estimate at $0.53, a 15% gain, and is raising the fiscal 2003 (Feb.) EPS estimate by $0.02 to $2.04. S&P expects strong free cash flow to fund debt reduction and acquisitions. Shares remain attractive at only 13.5 times the fiscal 2003 estimate, an unwarranted and substantial discount to the S&P MidCap index and peers.

Citigroup (C ): Reiterates 5 STARS (buy)

Analyst: Stephen Biggar

The bank identified its exposure to troubled Worldcom, noting $85 million in bond exposure, and $250 million at its life and annuity business. It sees a relatively modest financial impact, which needs to be put in context of a $10 billion loss reserve, and $1.05 trillion in assets. Diversification by geography and customers remains a hallmark of Citigroup's business model. S&P is lowering the 2002 earnings per share estimate by $0.05 to $3.20 in order to reflect the potential for additional mild deterioration in broader credit quality trends. Citigroup shares are trading at historic low at under 12 times S&P's EPS estimate.

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