S&P Says Buy JetBlue Airways

JetBlue Airways (JBLU ): Maintains 5 STARS (buy)

Analyst: James Corridore

JetBlue ordered 100 EMBRAER-190 jets, a departure from its single-plane-type strategy. Risks, in S&P's view, include JetBlue being the launch customer for this new type of plane, and the need to add new maintenance and training programs. JetBlue estimates EMB-190 costs around a penny per seat-mile more than its current A320 fleet. But S&P thinks this added expense will be offset by higher fares in new markets (while still offering fares that are 40%-60% below other airlines). S&P thinks if executed properly, an addition of planes could up JetBlue's earnings per share growth rate in the years 2005 to 2010, boosting the potential share price appreciation.

NBTY (NBTY ): Upgrades to 5 STARS (buy) from 3 STARS (hold)

Analyst: Howard Choe

Following a conference call with the maker of nutritional supplements, whose products include Nature's Bounty and Vitamin World, S&P now has a more favorable view of NBTY's planned $250 million cash acquisition of Rexall Sundown. The deal is expected to close in July. S&P estimates the transaction will add some 40% to sales and be accretive to earnings per share by 10 cents to 15 cents; S&P thinks the deal is in line with NBTY's tactic of buying strategic assets cheaply in a depressed market, which is supported by its solid balance sheet and strong cash flows. S&P is raising the fiscal 2003 (Sep.) and fiscal 2004 earnings per share estimates to $1.29, and $1.60. With a p-e of 13, based on S&P's 2004 estimate -- 20% below the S&P 500 -- S&P thinks the shares are attractive.

CDW Computer (CDWC ): Upgrades to 3 STARS (hold) from 2 STARS (avoid)

Analyst: Amrit Tewary

The 1.3% increase in May sales, vs. a year ago is a little better than S&P expected. Double-digit growth in sales to the public sector more than offset continued weakness in the corporate sector. S&P thinks CDW is gaining share from competitors in this difficult information-technology spending environment, and thinks it's best positioned in its peer group for a recovery in corporate spending. Its shares are trading at 19 times S&P's 2003 earnings per share estimate of $2.15. With a p-e-to-growth rate of 1.1, on par with peers and below the S&P 500, S&P views CDW as fairly valued.

Freddie Mac (FRE ): Reiterates 3 STARS (hold) and Fannie Mae (FNM ): Reiterates 4 STARS (accumulate)

Analyst: Erik Eisenstein

Press reports indicate that the Securities and Exchange Commission is looking into Freddie Mac's accounting. On Monday Freddie Mac replaced its president and chief operating officer for not fully cooperating with a review of the company's earnings statements, and also replaced its chairman and chief executive and its chief financial officer. In addition, Freddie Mac faces an investigation by the Office of Federal Housing Enterprise. S&P expects the market's reaction to be relatively muted. Still, a mild reaction would highlight the lack of visibility in Freddie Mac's results and, in S&P's opinion, give further ammunition to critics of Freddie Mac and fellow government-sponsored enterprise Fannie Mae. The government may seek tighter regulation of the two. However, S&P continues to think the current importance of the mortgage market to the economy provides near-term political protection.

Nokia (NOK ): Maintains 5 STARS (buy)

Analyst: Ari Bensinger

Nokia sees June-quarter mobile-phone sales at the low end or below the prior guidance range of 4%-12% growth, reflecting the impact of a weak U.S. dollar and SARS in China. Still, because of strong operating margins (five times higher than nearest competitor Motorola), Nokia expects to meet the guided range of 13 euro cents (15.3 U.S. cents) to 16 euro cents earnings per share. S&P sees strong sales growth throughout the second half, driven by the launch of several new handset models introduced in the beginning of the year. At a discount to its $20 fair value based on S&P's discounted cash flow model, S&P recommends buying Nokia.

Regeneron Pharmaceuticals (REGN ): Upgrades to 3 STARS (hold) from 1 STAR (sell)

Analyst: Frank DiLorenzo

S&P believes there's a low probability of Axokine approval and, if approved, S&P sees it as a minor product considering the competition and potential for neutralizing antibodies. However, biotechs with limited prospects have spiked up in sympathy with better names. S&P continues to believe the FDA environment is improving, and thinks this has had a positive impact on the sector. While there are more attractive biotech names out there, in S&P's view, S&P would hold the shares primarily due to strengthening industry fundamentals.

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