S&P Says Accumulate AT&T Wireless

AT&T Wireless (AWE ), Nextel Partners (NXTP ) and U.S. Cellular (USM ): Reiterates 4 STARS (accumulate); Nextel Communications (NXTL ): Reiterates 5 STARS (strong buy)

Analyst: Kenneth Leon

S&P thinks an economic recovery should benefit the S&P Wireless Telecom Index; S&P sees increased net subscriber growth and average revenue/user growth, as well as widening margins. S&P expects a strong third quarter for the group. Effective November 24, telephone number portability rules may increase competition, customer churn, and spur market share changes. Still, S&P sees wireline numbers switching to wireless -- driving long-term secular growth.

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

Analyst: Dennis Milton

The world's largest burger chain says its systemwide sales grew 11.1% year-over-year in September, due to a strong sales performance in the U.S. and the translation of a weaker U.S. dollar. Same-store sales for the McDonald's brand increased 3.7%, including a 10% increase in the U.S., a 0.9% decrease in Europe, and a 4.2% decrease in the Asia-Pacific/Middle East/Africa regions. The sales results are mainly in line with S&P's estimates, and S&P is keeping its 2003 earnings per share estimate of $1.40. S&P's 12-month target price of $26 is based on a price-earnings multiple of 16 -- in line with peers, and on S&P's 2004 earnings per share estimate of $1.58.

Comverse Technology (CMVT ): Maintains 4 STARS (accumulate)

Analyst: Kenneth Leon

S&P thinks Comverse Technology's shares may trade higher Wednesday after being selected by Telefonos de Mexico to implement a widespread expansion of its wireline voicemail services. S&P sees new business from Telmex as a boost to Comverse's mature voicemail product area while it realizes solid growth in enterprise security and monitoring. Details of the new contract are undisclosed, but it will extend to the Telmex national network. S&P 's 12-month target price is $21, based on discounted cash flow and price-to-sales analyses. With a below-peers p-e of 3.5, based on S&P's fiscal 2004 (Jan.) sales estimate, S&P views Comverse shares as attractive.

Alcoa (AA ): Maintains 4 STARS (accumulate)

Analyst: Leo Larkin

The aluminum maker posted third-quarter earnings per share of 33 cents, vs. 24 cents, on a 3.1% sales gain, ahead of S&P's 24 cents estimate. Sales rose on higher prices for alumina and aluminum and on acquisition-related gains. Earnings gains reflected cost cutting, sharply higher profits in alumina, a lower interest expense, and a reduced tax rate. S&P thinks the results as impressive, given the lingering weakness in many of Alcoa's end markets; the results suggest solid future earnings gains on a stronger global economy. Shares are trading with a p-e of 18, based on S&P's $1.60 earnings per share estimate for 2004. This compares favorably to the p-e of 19 for the S&P 500 index (GAAP). S&P thinks Alcoa should outperform the market.

Yum Brands (YUM ): Reiterates 4 STARS (accumulate)

Analyst: Dennis Milton

Yum Brands, which operates quick-service restaurants KFC, Pizza Hut and Taco Bell, posted September-quarter earnings per share of 54 cents, before one-time items, vs. 46 cents. The results were 2 cents above S&P's estimate. U.S. blended same-store sales were flat, year-to-year. Yum benefited from international expansion, reduced general and administrative expenses, a lower effective tax rate, and share repurchases, but the results were partly offset by lower restaurant margins. S&P is lifting the 2003 earnings per share estimate by 2 cents, to $2.03, to account for third-quarter results. With a p-e of less than 16, the shares trade at a discount to peers and the S&P 500, despite Yum's strong international growth opportunities.

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