S&P Ups Photronics

Photronics (PLAB ): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Richard Tortoriello

Shares have recently declined to valuations not seen since the cyclical trough of 1992, and are trading at one times the book value and 0.9 times trailing sales. While photomask sales growth slowed in the third quarter on competitive pricing and a slowing in leading-edge designs, S&P thinks the third quarter represents a pause in new design growth, rather than a downturn. With expanded operations in Europe and Asia, Photronics is well positioned for market growth, which S&P expects in 2003. S&P view Photronics as attractive at 12 times the calendar 2003 earnings per share estimate of $0.90, vs. the projected growth of 17%.

IMC Global (IGL ): Maintains 5 STARS (buy)

Analyst: Richard O'Reilly

S&P thinks that a reduction in the expected size of the corn crop because of the drought bodes well for increased acreage and fertilizer use in 2003. Private consultants are predicting that corn output this year will be near nine billion bushels, below the USDA's July estimate of 9.8 billion. These estimates would result in the lowest stocks-to-use ratio since 1995. S&P would expect that corn acres, the most important crop for fertilizer use, would increase in 2003 from the 79 million planted this year. S&P sees 2002 earnings per share at $0.30, and sees 2003's at $0.80.

Emulex (ELX ): Maintains 3 STARS (hold)

Analyst: Richard Stice

Emulex posted June-quarter pro-forma earnings per share of $0.16 vs. $0.11, in line. Revenues were up 20%, aided by a 27% rise in sales of two Gigabit products. Gross margin widened on product mix and manufacturing efficiencies. S&P still sees fiscal 2003 (June) earnings per share at $0.75. Emulex maintains a dominant position in the eventual high-growth market, but the lack of a near-term rebound in IT spending, bad earnings quality and eroding valuation tempers S&P's enthusiasm. In fiscal 2001, the inclusion of an options expense would have more than tripled the loss per share. Trading above peers on a price-to-sales basis, S&P says hold Emulex.

USAir (U ): Maintains 2 STARS (avoid)

Analyst: James Corridore

In a major step toward final approval of a $900 million loan guarantee from the U.S. government, the pilots union approved $465 million in wage and other concessions. Mechanics and flight attendants have not yet agreed to concessions, and all labor groups need to grant such relief. Separately, USAir issued a press release Thursday night denying it told bondholders it can repay debt without filing for bankruptcy. Pilot concessions are a positive step, but bankruptcy risk is high, and the industry environment is poor. The Size of USAir's debt load will make it difficult to recover.

TJX (TJX ): Reiterates 4 STARS (accumulate)

Analyst: Tuna Amobi

Citing unusually hot weather and limited summer clearance, the company posted a 1% dip in July same-store sales. But second quarter and year to date same-store sales were up 2% and 4%, respectively, in line. Total July sales rose 9%, with solid contributions from the Canada-based HomeSense and Winners chains. TJX notes that inventories are in excellent shape at the U.S. based T.J. Maxx, Marshalls, HomeGoods, and A.J. Wright chains. It affirmed $0.22-$0.24 July-quarter earnings per share guidance. Pending an August 13 earnings call, TJX has appeal at 15 times S&P's $1.15 fiscal 2003 (Jan.) earnings per share estimate, in line with peers.

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