Still Accumulate AT&T

Also: Analysts' opinions on Wendy's International, Dell Computer, and others

AT&T (T ): Reiterates 4 STARS (accumulate)

Analyst: Todd Rosenbluth

With this morning's rise, AT&T shares are near our previous price target. We are encouraged by Ma Bell's effort to offset sizable long distance competition by entering the local service markets in Maryland and Virginia this week, and expect more opportunities for the company to bundle local and long distance will emerge during 2003. Even though we see long distance-related challenges and some earnings quality issues (pensions), we calculate that AT&T still trades at more than a 40% discount to its Baby Bell peers on both a p-e and enterprise value/EBITDA basis. We are raising our price target to $19.75.

Wendy's International (WEN ): Downgrades to 4 STARS (accumulate) from 5 STARS (strong buy)

Analyst: Dennis Milton

The downgrade is based on the stock's valuation. We continue to believe that Wendy's has excellent long-term prospects and should continue to benefit from expansion of its Tim Horton's and Baja Fresh concepts. We expect earnings per share to rise 10% in 2003, despite a sluggish economy and fierce competition in the U.S. fast food industry. However, Wendy's shares have jumped nearly 30% from their March low, and now trade at 15 times our 2003 earnings per share estimate of $2.07, a premium to peers. We view the stock as attractive, given its growth potential and superior operating history, but its shares are less compelling at their current valuation.

Dell Computer (DELL ): Reiterates 3 STARS (hold)

Analyst: Megan Graham-Hackett

Dell announced May-quarter earnings per share of 23 cents vs. 17 cents, in line with estimates. Revenues were up 18% to $9.5 billion. Unit shipments rose 29%, as Dell gained 3 points of market share year-over-year. Dell sees no change in business environment and expects July-quarter revenues to be up $200 million quarter-over-quarter and earnings per share of 24 cents, in line with our model. We're keeping our fiscal 2004 (January) operating estimate at $1.01; our S&P Core EPS estimate is 68 cents, reflecting the estimated effect of stock option expense. At 32 times our operating estimate, Dell trades above peers, but given share gains, cash flow generation, we view the stock as worth holding.

Hispanic Broadcasting (HSP ): Still 4 STARS (accumulate)

Analyst: Tuna Amobi, CPA

The company reported 3 cents vs. 6 cents first-quarter earnings per share, 3 cents below consensus. While an 8.7% revenue rise was above the industry average, EBITDA retreated 37% on merger expenses, station start-up costs and programming acquisitions. With FCC approval for the company's proposed merger with Univision likely to be delayed until the agency's June 2 media ownership vote, Hispanic Broadcasting plans no earnings conference call. We still see significant long-term prospects for this likely combination of Spanish radio and TV giants in a fast-growing demographic. We believe the stock's premium p-e versus the overall market is warranted by our 25% expected long-term EPS growth.

Kohl's (KSS ): Reiterates 3 STARS (hold)

Analyst: Jason Asaeda

April-quarter earnings per share of 32 cents vs. 31 cents one year earlier met Kohl's recently lowered guidance. Same-store sales declined 2.4% on a late start to selling of spring apparel due to inclement weather. However, with 35 new store openings, sales rose 13.2%. With the company up against strong July-quarter same-store sales comparison (it posted a 10.6% gain last year) and facing near-term markdown exposure due to higher than planned inventories, we are trimming our fiscal 2004 (ending January) estimate by 8 cents, to $2.15. Given the tough retail outlook and the stock's p-e-to-growth multiple of 1.1, in line with its peers, we would not add to positions.

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