S&P Says Still Buy Qualcomm

Qualcomm (QCOM ): Maintains 5 STARS (buy)

Analyst: Kenneth Leon, CPA

Verizon Wireless announced that in April it will offer a global phone able to operate in both CDMA and GSM networks. This will allow the customers of Verizon Wireless and GSM carriers, including Vodafone, to roam in each market. The chipset that allows for usage across these varied systems is made by Qualcomm. As the market leader, Qualcomm's mobile station modems, known as MSM chips, are expanding. Combined with its license fees from CDMA royalties, S&P sees Qualcomm's net margins above 30% in fiscal 2004 (Sep). S&P's 12-month target price is $80. S&P would buy Qualcomm on the 2005 earnings per share estimates.

United Rentals (URI ): Maintains 4 STARS (accumulate)

Analyst: Markos Kaminis

United Rentals posted fourth-quarter earnings per share of 15 cents, excluding $3.18 in charges, vs. earnings per share of 9 cents before charges, which is 3 cents below S&P's estimate. Revenues rose 6.9% on growth in rentals and sales. Key driving force, rentals, benefited from 2.6% better equipment utilization, despite 5.6% higher rental rates. United Rentals guided 2004 earnings per share of $1.00 to $1.10. S&P is maintaining the earnings per share estimate of $1.08. S&P thinks state highway spending will improve in 2004 with the passing of a new highway spending bill, and sees economic growth stabilizing commercial construction. S&P's target price, based on a discounted cash-flow model, is $27. S&P finds the shares to be attractive.

Kimberly-Clark (KMB ): Maintains 3 STARS (hold)

Analyst: Howard Choe

Kimberly-Clark will evaluate a tax-free spin-off of its Neenah paper and Technical paper businesses, along with some pulp and timber assets in Nova Scotia and Ontario. These assets generate about $650 million in sales, which is less than 3% of total sales. S&P views this possible move favorably, as it reduces Kimberly-Clark's pulp integration to about 10% from about 40%, providing more opportunity to capture pricing in a declining pulp cycle and increase focus on its core businesses. Given S&P's modest projection for sales and profit growth, S&P views Kimberly-Clark as fairly valued at a 3% discount to peers.

Carnival (CCL ): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Thomas Graves

Based on S&P's view of improved cruiseship demand in fiscal 2004 (Nov.), S&P is raising the fiscal 2004 earnings per share estimate to $2.07, from $1.98. S&P expects the stock to benefit beyond fiscal 2004 from the prospects of easing industry capacity growth and increased free cash flow. However, S&P sees these favorable expectations already reflected in the stock price, which, based on calendar 2004 earnings per share estimates, is at close to a 20% price-earnings premium to the S&P 500. S&P is raising the 12-month target price to $48, from $44. With the shares trading near S&Ps new target price, S&P would hold Carnival.

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