Bear Stearns Ups Interstate Bakeries Rating

Analyst Terry Bivens says the bakery chain is showing cost improvements and a rebound in snack cake sales

Bear Stearns upgraded Interstate Bakeries (IBC ) to peer perform from underperform.

Analyst Terry Bivens says business fundamentals appear to have stabilized. He sees a chance for a better year in fiscal 2004 (May) based on savings from plant and thrift store closings. He says more aggressive rating awaits better visibility on a rebound in snack cake sales, and a rise in EBITDA margins from a depressed 5.7% level of fiscal 2003.

He notes challenges still exist in managing commodity fuel and employee costs. Bivens says the valuation is short of compelling, as heavy debt restricts financial flexibility. He raised the 2 cents fourth-quarter earnings per share estimate to 7 cents, (bringing FY 2003 to $0.92); he sees 97 cents for fiscal 2004.

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