S&P Cuts Claire's Stores to Hold

Claire's Stores (CLE ): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Dennis Milton

Claire's shares have rebounded 75% from their October 2002 lows, reflecting, S&P believes, improved sales trends and a favorable recent product mix. They now trade at nearly 17 times S&P 's fiscal 2004 (Jan.) earnings per share estimate of $2.05. According to S&P's discounted cash flow model, The Accessories chain's shares are currently trading in line with its intrinsic value. S&P's 12-month target price of $36 is based on the current p-e level of 17 times forward earnings and S&P's fiscal 2005 earnings per share estimate of $2.12. S&P would not add shares at the current valuation.

Regis (RGS ): Reiterates 5 STARS (buy)

Analyst: Dennis Milton

The hair-salon chain's June-quarter earnings per share of 54 cents before a one-time charge, vs. a year-ago's 45 cents, is in line with S&P's estimate. Revenues grew 17%, mostly on expansion and acquisitions. S&P projects fiscal 2004 (June) earnings per share of $2.15, up 10% from fiscal 2003's $1.96. At 15 times this estimate, Regis trades at a discount to the S&P SmallCap 600. S&P views the stock as significantly undervalued, given its strong growth prospects. S&P's 12-month target price of $44 assumes calendar 2004 earnings per share of $2.20 and a forward p-e ratio of 20, in line with the recent S&P SmallCap 600 valuation.

Andrx (ADRX ): Maintains 4 STARS (accumulate)

Analyst: Herman Saftlas

Andrx received tentative approval for its generic version of Pfizer's 10 mg. Glucotrol drug for type II diabetes (sales of $217 million in 2002). The generic drug should be an important contributor to Andrx's 2004 earnings per share, with expected six months of first-filer marketing exclusivity after the launch (subject to the outcome of patent litigation with Pfizer). Anxrx's pipeline also includes generic versions of Glucophage, Wellbutrin SR, and Depakote. S&P's 12-month target price for this high-risk stock is now $24, derived by applying the average specialty drug p-e ratio to S&P's $1.25 estimate for 2004.

Liberty Media (L ): Reiterates 4 STARS (accumulate)

Analyst: Tuna Amobi

Citing the lack of adequate synergy opportunities to support the expected transaction value, Liberty announced its decision to withdraw from the Vivendi auction. S&P isn't surprised by this development, as Liberty had lately ceded frontrunner status in the auction. Even with its prime cable networks, S&P viewed Vivendi's suggested $14 billion asking price as lofty, more so for a cash-and-stock deal. Also, a Vivendi deal so soon after Liberty's undigested acquisition of the QVC home-shopping network would have been a financing stretch for Libery, though not impossible. With added tax shelter on likely free cash flow, S&P views Liberty as attractive at a notable discount to net asset value.

Computer Associates (CA ): Maintains 4 STARS (accumulate)

Analyst: Jonathan Rudy, Richard Stice

Computer Associates announced plans to settle all outstanding litigation regarding past accounting issues. The company will take a $144 million pretax charge, which includes the issuance of up to 5.7 million shares of common stock and associated administrative expenses. This settlement is separate from the ongoing SEC and U.S. Attorney's Office investigations. Computer Associate's latest quarterly results were above S&P's expectations. However, given the uncertainty regarding the SEC probe, and with shares trading at a p-e ratio above peers and the S&P 500, S&P wouldn't add to positions.

AmeriCredit (ACT ): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Robert McMillan

The June-quarter loss per share of 11 cents vs. earnings per share of $1.00 was below S&P's estimate of earnings per share of 9 cents. The results were hurt by sharply lower revenues, reflecting the absence of receivables sale gains and lower servicing income, and by an asset impairment charge. However, S&P believes credit quality continues to improve. Quarterly net charge-offs fell to 7.4%, from 7.6% in the March quarter. S&P is trimming its fiscal 2004 (June) earnings per share estimate to 89 cents, from 90 cents. But AmeriCredit's shares are trading at a discount to S&P's projection of long-term earnings per share growth rate of 15%.S&P's 12-month target price is $12.

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