S&P Cuts Boston Scientific to Accumulate

Boston Scientific (BSX ): Downgrades to 4 STARS (accumulate) from 5 STARS (buy)

Analyst: Robert Gold

S&P thinks clinical data on Boston Scientific's Taxus stent, to be released Sept. 15, will show a dramatic reduction in vessel restenosis rates relative to bare-metal stents. But regulatory risks and S&P's increased concerns over a possible price battle with rival Johnson & Johnson has led S&P to reduce the 12-month target price to $68 from $75. S&P continues to expect that solid trial data will allow Boston Scientific to ultimately grab 40% to 50% of the stent market. This factor, along with strong performance in other business segments, should help drive revenue and earnings growth beyond peers through 2005.

ChoicePoint (CPS ): Maintains 4 STARS (accumulate)

Analyst: Bryon Korutz

Identification technology company ChoicePoint shares are down on news that because of continued weakness in its precision marketing segment, the company now expects 2003 revenue growth of 8%-10%, down from its previous estimate of 10%-12%. S&P is shaving 2 cents off the 2003 earnings per share estimate, and now sees $1.48. S&P remains optimistic about ChoicePoint's insurance unit, and marketshare gains in its employee screening business and a cost structure S&P sees as improving. With shares trading below S&P 's 12-month target price of $41, based on a discounted cash flow model and historical price/sales ratio, S&P views the shares as attractive.

Monsanto (MON ): Maintains 2 STARS (avoid)

Analyst: Stewart Glickman

A federal court in Brazil has suspended a recent decision to permit genetically modified soybeans, and the top EU court has upheld Italy's right to ban genetically modified corn. While both decisions are preliminary, S&P remains concerned about political resistance to genetically modified products, especially in Brazil given its upcoming October planting season. Monsanto is trading at 17 times S&P's 2004 earnings per share estimate of $1.45, above peers. S&P's discounted cash flow model, using 5% to 6% free cash flow growth, also suggests it is overvalued. S&P's target price is $23, and S&P would avoid the shares.

Nokia (NOK ): Maintains 5 STARS (buy)

Analyst: Ari Bensinger

Nokia expects third-quarter handset sales to be flat or slightly down year to year (due to pricing pressures), below the 2% S&P had seen. Even so, on strong handset phone margins, Nokia sees third-quarter earnings per share at the high end of the prior 15 euro cents to 17 euro cents guidance. S&P notes that third-quarter handset unit volumes are expected to show faster-than-market growth of well over 10% year over year. S&P expects handset sales to ramp up materially in the important fourth-quarter holiday period, aided by a recently revamped portfolio. S&P still sees 2003 earnings per share at 78 cents, and sees 2004's at 95 cents. Based largely on a discounted cash flow analysis, S&P's 12-month target price is $20.

Meredith (MDP ): Maintains 4 STARS (accumulate)

Analyst: William Donald

Meredith detailed its growth strategies at a meeting for analysts and investors. It sees much opportunity to boost advertising pages at American Baby Group and plans to build on the Better Homes & Gardens brand with new lines of home interior materials, other consumer products, and expanded licensing. Meredith will publish new lines of Home Garden TV and Food Network books in the Fall. It is also growing marketing relations with the likes of Chrysler, Dodge, Jeep, and Carnival Cruise. S&P's 12-month target price of $55 is based on a p-e of 22, and growth in earnings per share, which S&P sees at $2.10 in fiscal 2004 (June), and $2.45 in fiscal 2005.

Research in Motion (RIMM ): Upgrades to 3 STARS (hold) from 2 STARS (avoid)

Analyst: Kenneth Leon

RIMM shares are trading higher after reporting stronger-than-expected August-quarter guidance late Monday. The company sees earnings per share of 7 cents to 11 cents, before litigation expenses, well above S&P's 1-cent loss per share estimate. RIMM also expects between 94,000 to 97,000 net new BlackBerry subscribers in the quarter, and sales at $123 million to $126 million, well above prior guidance. S&P is raising the fiscal 2004 (Feb.) and fiscal 2005 earnings per share estimates to 36 cents and $1.01, before special items. Despite trading at a high premium to its peers on price to sales basis, S&P would hold RIMM shares on the company's better outlook.

McDonald's (MCD ): Maintains 3 STARS (hold)

Analyst: Dennis Milton

The nation's largest burger chain says systemwide sales increased 10.5%, year to year, due mainly to same-store sales gains of 3.8% for the McDonald's brand and a positive translation effect from a weaker dollar. Same-store sales increased 8.8% in the U.S. and 1% in Europe, and fell 4% in the Asia-Pacific/Middle East/Africa regions. These results are basically in line with S&P's estimates. S&P is maintaining the 2003 earnings per share estimate of $1.40. S&P's 12-month target price of $24 is based on an average industry p-e multiple of 15 times earnings and S&P's 2004 earnings per share estimate of $1.58.

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