S&P Says Accumulate News Corp.

News Corp. (NWS ): Reiterates 4 STARS (accumulate)

Analyst: Tuna Amobi, CPA, CFA

Amid speculations on his ongoing contract negotiations, COO Chernin, at an investor conference, says rather unequivocally that he is unlikely to jump ship for other opportunities, even as governance issues have brewed at peer Disney. Separately, News Corp. says second-quarter advertising scatter is up in the mid-single digits, vs. upfront, and it expects a 2004-05 upfront rise in the mid- to high-single digits. But S&P's upfront outlook is tempered by concerns about potential audience-deficiency units. Chernin also reaffirmed the outlook for DirecTV, SkyItalia, BSkyB, and STAR Asia.

Procter & Gamble (PG ): Reiterates 5 STARS (buy)

Analyst: Howard Choe

Consumer-products giant P&G announced it expects March-quarter earnings per share to be 1 cent to 2 cents higher than the Street's consensus of $1.06, on strong organic sales growth. S&P is raising the March-quarter earnings per share estimate to $1.08, from $1.05, and is upping the fiscal 2004 (Jun.) estimate to $4.60, from $4.57. S&P also is raising the fiscal 2005 estimate to $5.10, from $5.05. P&G's outlook is promising, given its intense focus on its markets, product innovation, and long-term profitability. S&P believes the company could revert to its 10-year average price-earnings of 26 and is raising the 12-month target price to $125, from $118. P&G also announced a 2-for-1 stock split and raised its dividend.

Krispy Kreme Doughnuts (KKD ): Reiterates 4 STARS (accumulate)

Analyst: Dennis Milton

Krispy Kreme posted January-quarter earnings per share of 26 cents, vs. 19 cents, excluding one-time items, and in line with both its February preannouncement and S&P's estimate. Systemwide sales jumped 26.6%, including a 1% contribution from the acquisition of Montana Mills. Excluding one-time items, fiscal 2004 (Jan.) earnings per share rose 38%, to 91 cents, from 66 cents. S&P is maintaining the fiscal 2005 earnings per share estimate of $1.20 and the 12-month target price of $43. Krispy Kreme shares trade at 32 times S&P's fiscal 2005 earnings per share estimate. S&P thinks the shares are attractively valued at this level, given the company's strong growth prospects.

AMR Corp. (AMR ): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: James Corridore

Reflecting competition in the transcontinental markets and the likely impact of AMR unit American Airlines' "fly two, get one free" promotion, S&P is widening the first-quarter loss estimate to $1.00, from 70 cents. High oil prices are also contributing to the expected loss. For 2004, S&P is widening the loss estimate to 25 cents, from 5 cents, which is a sharp divergence from the Street's estimate of $1.24 earnings per share. With more low-cost carriers entering transcontinental markets, S&P believes AMR needs more traction on its cost-cutting programs to be able to compete. S&P has lowered the 12-month target price by $3, to $16.

Barrick Gold (ABX ) and Newmont Mining (NEM ): Maintains 4 STARS (accumulate); Placer Dome (PDG ): Reiterates 3 STARS (hold)

Analyst: Leo Larkin

S&P remains bullish on gold and gold stocks despite the expectation of near-term weakness. S&P continues to believe that a bear market rally in the U.S. dollar will place downward pressure on the metal and the stocks, as evidenced by gold's negative reaction to today's trade deficit number. But S&P also believes that the long-term fundamentals remain intact, including low short-term interest rates, lower gold output, and erratic financial markets.

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