S&P Cuts AmeriCredit to Hold

Also: analysts' opinions on Best Buy, EMC, and Pacific Sunwear

AmeriCredit (ACF ): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Robert McMillan

AmeriCredit says it will delay releasing its operating results for fiscal 2003 (June) as the company and its independent accountants review its accounting treatment under FAS 133 of certain interest rate swaps entered into prior to 2001, used to hedge variable cash flows on credit enhancement assets. AmeriCredit also says it will miss its fiscal 2003 net income guidance of $60 million to $70 million because of an impairment of credit enhancement assets. S&P is lowering the fiscal 2003 earnings per share estimate to 38 cents, from 46 cents. Given the level of uncertainty, S&P would not add to positions.

Best Buy (BBY ): Maintains 5 STARS (buy)

Analyst: Amrit Tewary

Best Buy raised its earnings outlook for the August quarter to 37 cents to 42 cents from 27 cents to 32 cents. For the August quarter vs. a year ago, Best Buy sees mid-single-digit same-store sales growth, at least 70 basis points of gross margin improvement, and improved selling, general, and administrative expenses levels. S&P is raising the earnings per share estimates for the August quarter to 38 cents, from 31 cents, for fiscal 2004 (Feb.) to $2.45 from $2.30, and is raising the fiscal 2005 estimates to $2.78 from $2.68. At 18 times S&P's fiscal 2004 estimate, Best Buy is on par with the S&P 500 but at a discount to the company's average historical p-e multiple of 23. S&P's new 12-month target price of $56 assumes a multiple of 23 based on S&P's fiscal 3004 estimate.

EMC (EMC ): Maintains 3 STARS (hold)

Analyst: Richard Stice

At an analyst meeting Wednesday, EMC discussed several achievements over the past year including, in S&P's view, significant cost reductions, improving margins, and the expansion of its product portfolio. Moreover, EMC said it is seeing a slight upturn in information-technology spending and reaffirmed its third-quarter guidance. S&P believes the ongoing turnaround has been noteworthy and expects further improvements over the next several quarters. However, S&P views this trend as already being reflected in the shares. Based on S&P's discounted cash flow analysis, S&P's 12-month target price is $11.

Pacific Sunwear (PSUN ): Maintains 4 STARS (accumulate)

Analyst: Yogeesh Wagle

Pacific Sunwear reported a 24% July sales rise over a year ago, driven by a strong 15.1% same-store sales gain. Same-store sales posted double-digit growth across all categories, with d.e.m.o. stores up 21.9% and PacSun stores 13.2%. The company raised its July-quarter earnings per share guidance to 25 cents to 26 cents, from 23 cents. S&P is raising the fiscal 2004 (Jan.) earnings per share estimate by 5 cents to $1.36, and sees $1.70 in fiscal 2005. S&P's 12-month target price of $35 (presplit) is 21 times the fiscal 2005 estimate -- a premium to peers but justified, S&P believes, by solid execution and faster growth as the specialty retailer capitalizes on surf and "street" inspired fashion trends.

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