S&P Says Accumulate Paxar

Also: Analysts' opinions on Capital One, Alcoa, and Caterpillar

Paxar (PXR ): Maintains 4 STARS (accumulate)

Analyst: Markos Kaminis

Paxar provided more detailed guidance Monday, with revenues seen at $162 million to $163 million, within its previous guidance. After a charge of $3.7 million to reduce headcount and consolidate operations, the maker of bar code systems for retailers now expects earnings per share of one cent to three cents for the first quarter, vs. a pre-charge of 15 cents to 18 cents seen previously. Paxar is faced with the challenge of moving its operating capacity overseas at the same pace as its customers. Although S&P has lowered its first quarter operating earnings per share estimate to 11 cents, from 15 cents, S&P views Paxar shares as undervalued vs. peers, on a p-e/growth basis, with shares trading at 11 times the 96 cents earnings per share that S&P sees for 2003.

Capital One Financial (COF ): Upgrades to 4 STARS (accumulate) from 2 STARS (avoid)

Analyst: Robert McMillan

With some of its competitors seeing improvements in credit card charge-offs and delinquencies, S&P thinks Capital One's credit trends are also likely improving. This, combined with continued healthy consumer spending, suggests that the company can continue generating double-digit growth. S&P thinks shares are poised to outperform the market as business momentum improves. The stock is also trading at a significant discount -- eight times S&P's conservative earnings per share estimate of $4.38 --which S&P will narrow even further in the near term.

Alcoa (AA ): Reiterates 4 STARS (accumulate)

Analyst: Leo Larkin

Alcoa posted first quarter earnings per share of 23 cents vs. 22 cents on a 4.3% sales gain, ahead of the Street's estimate of 21 cents. Earnings per share rose as higher volume and cost-cutting more than offset increased energy costs. Volume of tons shipped rose in all but the alumina segment, and margins expanded in all but the engineered products unit. S&P believes the performance was especially impressive given the higher depreciation and interest expense. S&P is raising the 2003 estimate to $1.04, from 95 cents, to reflect the expectation for a gradual improvement in sales and continued cost cutting.

Caterpillar (CAT ): Downgrades to 2 STARS (avoid) from 3 STARS (hold)

Analyst: James Sanders

Shares of this diversified construction equipment and engine maker have risen substantially over the past few weeks, which S&P attributes to the potential from the rebuilding of Iraq. S&P says while a more optimistic view of the prospects for increased construction spending is warranted, the stock's recent price escalation is an overreaction. S&P's discounted cash flow model, which assumes a long-term cash earnings growth rate of 5%-6%, indicates that shares are trading at a 20%-25% premium to the estimated fair value range. S&P would avoid Caterpillar.

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