S&P Says Buy Franklin Resources

Also: an analyst's opinion on Sabre Holdings

Franklin Resources (BEN ): Reiterates 5 STARS (buy)

Analyst: Robert Hansen

S&P expects the investment-services company to benefit from the U.S. dollar's slide, given that about 38% of Franklin's client assets, in S&P's estimate, are in global funds. The dollar fell 5% vs. the euro in December, rose 2.2% vs. the yen, and was flat vs. the Hong Kong dollar. Based on a review of three Franklin funds, S&P estimates Europe at 40% of global assets and Asia at 28%. As a result, S&P is raising the fiscal 2004 (Sep.) earnings per share estimate to $2.75, from $2.72. Also, S&P is upping the 12-month target price to $66, from $60, or 24 times S&P's fiscal 2004 estimate. S&P would buy Franklin, believing that a continued shift to higher-margin stock funds and global funds will aid fiscal 2004 earnings per share.

Sabre Holdings (TSG ): Maintains 3 STARS (hold)

Analyst: Scott Kessler

The U.S. Transportation Department announced late on Dec. 31 the deregulation of computer reservation systems. These systems were at one time owned and operated by the airlines, and were virtually the sole source for the booking and sale of airline tickets. All rules on these systems are scheduled to be phased out by July, 2004. S&P believes this news is a modest positive for Sabre, whose computer reservation system accounts for a majority of its revenues. S&P thinks this upcoming deregulation could enable Sabre to gain market share and reduce costs.

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