S&P Ups Landry's to Accumulate

Landry's Restaurants (LNY ): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Dennis Milton

The company posted fourth quarter earnings per share of 18 cents before charges, up 11% from a year ago and three cents ahead of S&P's estimate. Same-store sales fell 2%, hurt by harsh winter weather. However, the company has eased fears of a potentially difficult integration of its Salt Grass Steakhouse and Chart House acquisitions by posting higher than anticipated operating margins. At only 10 times S&P's 2003 earnings per share estimate of $1.73, Landry's shares trade at a discount to peers and the overall market, despite the company's strong growth prospects.

BP (BP ): Reiterates 2 STARS (avoid)

Analyst: Tina Vital

BP posted pro forma fourth quarter income of $2.64 billion vs. $1.77 billion, before special items of $94 billion vs. $1.07 billion, in line with the Street. Earnings from exploration & production rose 54%; gas & power fell 29%; refining & marketing dropped 25%; but the chemicals segment jumped 256%. The barrel of oil equivalent organic reserve replacement was 175% in 2002, and production rose 2.9% (on a lowered target). Still, BP's 2003 growth target of 0% to 3% is uncertain, and pension costs rose by $200 million in 2002; S&P expects a $300 million increase in 2003. Also, S&P sees 2003 earnings per share at $2.43, and 2004 earnings at $2.18. With a return on investment below peers, and sweeping realignment of upstream assets underway, S&P says avoid BP.

Coca-Cola (KO ): Reiterates 4 STARS (accumulate)

Analyst: Richard Joy

The soft drink manufacturer posted fourth quarter earnings per share before special items at 40 cents vs. 37 cents, in line with expectations. Full-year earnings per share was $1.77 vs. $1.59. Fourth quarter worldwide unit case volume gained 6%, with 2% from acquisitions. Volumes gained 5% for the North American, European, and Latin American markets. Africa rose 7% and Asia rose 10%. S&P says the global economy is challenging, but expects Coke volume growth of 4.5% in 2003. Share repurchases are likely to double to at least $1.4 billion in 2003. S&P is keeping its 2003 earnings per share estimate at $1.94. Coke is attractive, given its strong cash flows and earnings visibility.

Wyeth (WYE ): Maintains 4 STARS (accumulate)

Analyst: Herman Saftlas

The FDA approved Wyeth's social anxiety indication for Effexor XR antidepressant, and S&P projects Effexor family sales rising 25% to $2.6 billion this year. The filing for panic indication is expected in the second quarter. S&P now sees low-teens growth at Wyeth for both sales and earnings per share in 2003 on strength in Effexor, Protonix, Enbrel, and Refacto. Its balance sheet as been augmented by $4.8 billion from the sale of Amgen stock. One risk is uncertain: the outcome of a legal battle with Barr Labs over generic Premarin. At 15 times S&P's 2003 earnings per share estimate of $2.47, Wyeth is at the bottom of the peer big-pharma price-earnings range.

USA Interactive (USAI ): Maintains 3 STARS (hold)

Analyst: Scott Kessler

On Wednesday USA Interactive announced that Vivendi Universal is moving to sell some of its USA Interactive securities. Specifically, Vivendi agreed to sell 28 million warrants to Deutsche Bank and an option to obtain 4.19 million additional warrants to acquire USA Interactive common shares. Deutsche Bank is offering to sell notes exchangeable into 28 million USA Interactive shares. Vivendi recently owned 12.6% of USA Interactive's stock. S&P says it's no surprise that struggling Vivendi is looking to monetize its stake in USA, and despite some potential near-term selling pressure, the news doesn't change S&P's opinion.

P.F. Chang's China Bistro (PFCB ): Reiterates 5 STARS (buy)

Analyst: Markos Kaminis

P.F. Chang's posted fourth quarter earnings per share of 25 cents vs. 19 cents, in line with expectations. Revenue rose 30%, as previously noted. Same-store sales at its Bistro units rose 5.4%. Pei Wei's average weekly sales fell, but includes 11 new locations on a total of 16. Sales here should rise as market awareness improves. Pei Wei results will be volatile until a solid store base is in place. P.F. Chang's now sees 2003 earnings per share of $1.03, but S&P views $1.05 earnings per share as the more likely figure. At 31 times S&P's estimate, shares are modestly valued vs. the the 30% growth S&P forecasts. S&P's 12-month target is $41 to $42.

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