Accumulate Eaton Vance

Williams Cos. (WMB ): Maintains 2 STARS (avoid)

Analyst: Craig Shere

Shares are up over 20% Wednesday, as Williams hosted a conference call to provide a more detailed review of second-quarter results and ongoing restructuring efforts. Due to a lack of liquidity, Williams is unable to hedge positions in its energy marketing and trading book, and is exposing earnings to major fluctuations. However, S&P expects announcements by the the end of September that the energy marketing and trading unit is being divested, partnered, and/or shut down. S&P thinks Williams can meaningfully improve liquidity with successful divestitures, but says the execution risk is high given its weak credit.

Eaton Vance (EV ): Maintains 4 STARS (accumulate)

Analyst: Robert McMillan

The company posted July quarter earnings per share of $0.44 vs. $0.44 -- in line with estimates. Revenues rose 1.3%, driven by higher assets under management on contributions from acquisitions and internal growth. A 9% rise to $54.8 billion mostly reflected increases in separate accounts. Profitability was pressured by higher expenses. S&P is reviewing its estimates, but expects asset inflows to continue rising, boosted by Eaton Vance's good performance and new products. Shares are trading at 14 times the Street's fiscal 2003 (Oct.) $1.96 earnings per share estimate and remain attractive given Eaton Vance's good growth prospects.

AOL Time Warner (AOL ): Reiterates 2 STARS (avoid)

Analyst: Thomas Graves

For AOL, S&P sees the financial terms of the agreement to restructure its Time Warner Entertainment partnership as generally favorable. Also, agreements with AT&T and Comcast should boost AOL broadband subscribers. However, S&P has some concern about overall growth prospects for the AOL Internet business, and still sees a cloud over the stock related to investigations by the SEC and Justice Department. Furthermore, expensing of options would have cost AOL about $0.31 of earnings per share in 2001. S&P still sees enough risk in AOL to advise steering clear.

AT&T (T ): Maintains 3 STARS (hold)

Analyst: Todd Rosenbluth, Tina Vital and Craig Shere

AT&T and Comcast announced an agreement with AOL to restructure the Time Warner Entertainment partnership. The deal involves the sale of AT&T's 27.64% stake in Time Warner Entertainment to AOL, in exchange for the issuance to AT&T Broadband of $1.5 billion of AOL common, a 21% stake in the restructured cable TV unit (to be called Time Warner Cable), and $2.1 billion cash. While S&P sees the deal improving A&T's Broadband short-term liquidity, with AT&T shares down 36% in 2002 amid weakness in the long-distance market and credit risks, S&P says hold AT&T for now.

Newport Corp.. (NEWP ): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Ari Bensinger

Amid a weak semiconductor and fiber optic equipment market, Newport sees September quarter sales below its previous $48 million guidance. To improve profitability, the company is initiating a comprehensive restructuring program, including elimination of 225-275 employees. S&P is widening the 2002 loss estimate to $0.08 from $0.02. Newport's balance sheet remains strong with over $7 cash per share and relatively no debt. S&P views the stock as fairly valued at 31 times (after stripping out cash) the 2003 earnings per share estimate of $0.35 against the estimated 30% long term growth rate.