S&P Says Buy Exxon Mobil

Also: analysts' opinions on Capital One and RehabCare

Exxon Mobil (XOM ): Maintains 5 STARS (buy)

Analyst: Tina Vital

Oil producer Exxon posted third-quarter operating earnings per share of 55 cents, vs. 39 cents, before special items -- 7 cents under S&P's estimate on lower-than-expected performance across all business segments. Upstream income rose 8.4% on higher prices. Hydrocarbon production declined 3.1% on lower European gas demand and field declines. Natural gas volumes were below S&P's expectations. Downstream income rose on wider refining margins. Chemicals income fell 35% on higher feedstock costs. With strong returns, balanced growth, and shares trading below the target price of $48, S&P would buy the shares.

Capital One (COF ) : Reiterates 5 STARS (buy)

Analyst: Michael Morgan

Capital One projects 2004 earnings per share of $5.20 to $5.40, driven by mid-teens growth in its managed-loan portfolio, a gradual shift of its loan mix toward higher quality credits, and further diversification into international markets. Revenue margins should trend lower, offset by lower credit losses, and lower marketing and operating expenses. S&P still sees 2004 earnings per share of $5.60 on the belief that Capital One's guidance is too conservative. S&P's target price remains $75, valuing the shares at about 13 times S&P's 2004 estimate.

RehabCare (RHB ): Downgrades to 4 STARS (accumulate) from 5 STARS (buy)

Analyst: Mark Basham

The provider of rehabilitation services posted third-quarter earnings per share before a restructuring charge at 25 cents, vs. 41 cents -- below S&P's 27 cents estimate. S&P's downgrade reflects the view that the fourth quarter will not show the progress on the company's strategy to return to growth S&P had expected. S&P regards the lack of progress as disappointing, particularly in light of the removal of a major hindrance for the stock: the impact of new Medicare regulations known as the 65 Percent Rule. RehabCare estimates no more than 3% lower discharges because of the rule. S&P is placing the estimates and 12-month target price under review.

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