S&P Ups American Italian Pasta to Accumulate

American Italian Pasta Company (PLB ): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Anishka Clarke

American Italian Pasta posted June-quarter earnings per share of 65 cents vs. 59 cents, in line with S&P's estimate. Price promotions and trade inventory reductions limited revenue growth to 14%. Core volume growth of 10% and higher cost savings than expected led to a 10% rise in operating profits. S&P views favorably the extension of an exclusivity pact with major food distributor Sysco and the initiation of a three-year, $20 million cost reduction program. On S&P's expectations for double-digit growth in fiscal 2004 (Sept.), S&P views AIPC as attractive at 13 times the calendar 2004 earnings per share estimate of $3.02, a discount to peers.

Barnes & Noble (BKS ): Maintains 3 STARS (hold)

Analyst: Jason Asaeda

Barnes & Noble agreed to acquire DirectGroup Bertelsmann's 36.8% interest in Barnes & Noble.com (BNBN ) for $164 million in cash and notes, worth about $2.80 per Barnes & Noble.com share. It expects the transaction to close in 45 days, and to reduce fiscal 2004's (Jan.) earnings per share by 11 cents. S&P is adjusting the fiscal 2004 earnings per share estimate down to $1.79 and is putting fiscal 2005's under review. It remains to be seen whether Barnes & Noble.com will achieve positive cash flow in fiscal 2004, but recent cost cuts are encouraging. With less profit visibility, and with the stock trading at 14 times S&P's fiscal 2004 earnings per share estimate, modestly below the peer average, S&P sees the stock as adequately priced.

Louisiana-Pacific (LPX ): Downgrades to 1 STAR (sell) from 3 STARS (hold)

Analyst: Bryon Korutz

The company's second-quarter earnings per share of 6 cents vs. 5 cents, before one-time items, was 10 cents below S&P's estimate. Results were aided by higher oriented-strand board prices and by volumes in plastic building products, and were partly offset by higher energy and resin costs. S&P is raising the 2003 estimate to 33 cents, from 3 cents, on stronger near-term oriented-strand board prices. Looking further out, S&P sees these prices falling on the end of the stronger home building season and on the 5.3% drop S&P expects in 2004 housing starts. With the stock at 22 times S&P's 2004 earnings per share estimate of 55 cents, above the S&P 500, S&P would sell the shares.

CVS Corp. (CVS ): Maintains 5 STARS (buy)

Analyst: Joseph Agnese

CVS reported second-quarter earnings per share of 49 cents vs. 43 cents, a penny above S&P's estimate. Net sales rose 7.6%, 5.5% at same stores. Margins are benefiting from increased sales of generic drugs and improved inventory management despite a shift in the product mix toward lower-margin pharmacy sales, and increased employee benefits costs. CVS narrowed the 2003 earnings per share guidance range to $1.93-$1.98, from $1.92-$2.00. S&P is raising the 2003 earnings per share estimate to $1.96 from $1.94. At only 15 times that estimate, below peers, and with S&P's estimated long-term growth rate of 11%, S&P believes CVS remains undervalued.

Andrx (ADRX ): Reiterates 4 STARS (accumulate)

Analyst: Herman Saftlas

Andrx posted second-quarter earnings per share of 20 cents vs. a loss of 42 cents, 7 cents above S&P's estimate. Stronger revenue growth than expected, at 51%, was driven by the launches of Taztia XT, an over-the-counter version Claritin D-24, and royalties from generic Prilosec. The bottom line was helped by sharply lower litigation and other non-operating charges. S&P expect second-half earnings per share to exceed the first half, boosted by new products (possibly generic Wellbutrin SR), and manufacturing efficiencies. S&P has a 12-month target price of $27, which assumes a p-e of 22 times S&P's 2004 earnings per share estimate, in line with other specialty drug stocks.

Cox Communications (COX ): Maintains 3 STARS (hold)

Analyst: Tuna Amobi

Cox posted second-quarter growth in consolidated revenues and EBITDA of 14% and 20%, respectively. While run rates for high-speed data, digital video, and telephony came in at the lower end of S&P's expectations, this could be partly from seasonality. second-quarter GAAP earnings per share of 19 cents, on 5% more shares, benefited from a $124 million one-time gain on investment in Sprint PCS stock. Cox affirmed the 14%-15% 2003 revenue guidance, and maintains its outlook for positive full-2003 free cash flow. S&P is wary of a potential slowdown in advanced services, but will update its outlook Wednesday afternoon after a conference call.

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