S&P Says Accumulate AT&T Wireless

Also: analysts' opinions on Plantronics and La Quinta

AT&T Wireless (AWE ): Reitereates 4 STARS (accumulate)

Analyst: Kenneth Leon

AT&T Wireless shares are up 8% this morning following today's Wall Street Journal article that Cingular may be considering a possible acquisition of AT&T Wireless. This possibility was first raised in late December in the Journal, and S&P believes the rationale for wireless-industry consolidation among the six national wireless carriers makes sense. With merger and acquisition interest rising, S&P is bumping the 12-month target price to $11 from $9, based on existing discounted cash-flow assumptions instead of relative valuation metrics. But with AT&T Wireless also trading below peers at 1.3 times S&P's 2004 sales estimate, S&P would accumulate.

Plantronics (PLT ): Maintains 4 STARS (accumulate)

Analyst: Markos Kaminis

Plantronics posted December-quarter earnings per share of 37 cents, vs. 20 cents, well ahead of S&P's 29 cents estimate. Revenues climbed 24%, ahead of S&P's 15% projection, driven by robust demand for mobile-phone headsets and for wireless-office headsets. Operating margin widened to over 22%, vs. 14.5% on revenue leverage. Plantronics indicated that several factors may have led to market-share gains in the quarter that are unlikely to be sustainable over the longer term. However, S&P anticipates that a pickup in office and call-center demand in fiscal 2005 (Mar.) should aid growth. S&P's estimates are under review.

La Quinta (LQI ): Maintains 5 STARS (buy)

Analyst: Raymond Mathis

La Quinta announced the addition of eight franchise hotels with a combined 715 rooms in December. With about 8,700 franchise rooms open at 'the end of 2003, La Quinta was only 300 rooms behind the level it had hoped to achieve, closing the gap in the fourth quarter. Perhaps more importantly, from an overarching strategic point of view, S&P believes that La Quinta will reap outsized rewards as it leverages the strength of its brand and its improved operations by expanding outside of its geographic base to achieve a national footprint. S&P's 12-month target price remains $9.

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