S&P Says Still Buy Intel

Also: analysts' opinions on Starbucks, Nokia, and AT&T

Intel (INTC ): Maintains 5 STARS (buy)

Analyst: Thomas Smith

Intel's board approved a 100% increase in the quarterly cash dividend to 4 cents, from 2 cents, effective at a Mar. 1 payment date. The move echoes a greater emphasis on dividends at some analog chipmakers who, like Intel, have ample cash on hand for operations and acquisitions. Faced with low interest payments on the cash, S&P thinks higher dividends is a reasonable use of the cash. S&P believes Intel will be paying out over $1 billion per year in dividends, but holds $13.5 billion cash, and has good prospects in an industry expansion that should last into 2006.

Starbucks (SBUX ): Upgrades to 2 STARS (avoid) from 1 STAR (sell)

Analyst: Dennis Milton

Coffee chain Starbucks reported December-quarter earnings per share of 27 cents, up 39% from a year ago and 2 cents ahead of S&P's estimate. Operating margins widened on leveraging of fixed costs against same-store sales growth of 10%. At 41 times S&P's fiscal 2004 earnings per share estimate of 87 cents, boosted by 2 cents, Starbucks shares are at a significant premium to the S&P 500. While S&P continues to view them as overvalued, they now appear less vulnerable amid an improving economy and continued strength in sales trends. S&P is raising the 12-month target price by $4, to $30, and would still avoid shares at the current valuation.

Nokia (NOK ): Reiterates 5 STARS (buy)

Analyst: Ari Bensinger

Nokia posted fourth-quarter dollar-translated earnings per share of 36 cents, vs. 27 cents, at the high end of the prior raised guidance range. Mobile-phone sales rose 25% from the third quarter, with operating margins of 25%, roughly 5 times its nearest competitor, Motorola. Nokia guided first-quarter earnings per share at 17 euro cents ($0.22) to 19 euro cents, in line with S&P's estimate. S&P is keeping the 2004 earnings per share estimate at $1.09. Despite a market-leading position, Nokia trades at a discount to peers on a price-earnings basis. S&P would buy the stock at a notable discount to the 12-month target price of $26, which is based largely on S&P's discounted cash-flow model.

AT&T (T ): Maintains 3 STARS (hold)

Analyst: Todd Rosenbluth

The long-distance carrier's fourth-quarter earnings per share of 43 cents, vs. 66 cents is 1 cent below S&P's estimate, partly on lower other income and a lower tax rate than normal. Revenue declined more than expected amid price pressure and substitution. S&P is lowering the 2004 operating earnings per share estimate by 20 cents, to $1.63, on AT&T's likely aggressive response on pricing to recapture market share. S&P is encouraged by AT&T's efforts in debt and cost reduction so far, as well as its Voice over Internet Protocol offering plans. Even with margins and earnings per share declines, shares trade at a discount to peers on p-e and cash flow metrics. S&P is raising the 12-month price target to $22, from $21.

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