S&P Upgrades Jones Apparel to Accumulate

Jones Apparel (JNY ): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Marie Driscoll, CFA

Jones disappointed investors yesterday with second-half EPS targets. The Maxwell acquisition, completed July 3, is likely to dilute third-quarter EPS by 3 cents to 4 cents, and dilute fourth-quarter results by 1 cent to 2 cents. We think Jones is successfully replacing the Lauren license with lower-margined acquisitions and internally developed brands and extensions. We're lowering our 2004 EPS estimate to $2.75 from $2.88, but maintain 2005's at $3.21. We see a strong fashion trend, led by color, and we see lean retail inventories. With Jones at 11 times our 2005 estimate vs. the 13.1 historical average, we would accumulate. Our target price is $42.

Comcast (CMCSA ): Maintains 5 STARS (buy)

Analyst: Tuna Amobi, CPA, CFA

Shares are sharply down with media peers after a seasonally slow second quarter. We were disappointed with the modest downward revision of 2004 basic video and telephony subscriber guidance. But after the second-quarter call, we think primary catalysts are intact. With our new subscriber estimates, and higher-than-expected interest and depreciation and amortization expenses, our 2004 EPS estimate drops by 5 cents, to 37 cents, but 2005's stays at 77 cents. Our target price is $39. At an enterprise value of 9.5 times the estimated 2005 EBITDA, we think shares have appeal vs. peers. We also see possible support from stock buybacks.

W.M. Wrigley, Jr. (WWY ): Upgrades to 5 STARS (buy) from 3 STARS (hold)

Analyst: Richard Joy

Yesterday, Wrigley reported second-quarter EPS of 62 cents, vs. 56 cents, 2 centsbetter than our estimate, on 21% higher sales. Margins contracted on new product startup costs and acquisition charges, which we view as temporary. We are raising our 2004 EPS estimate by 2 cents to $2.22. We view the shares as attractive, given what we see as Wrigley's dominant global market shares, strong balance sheet, and solid operating momentum and cash flows. We're raising our target price by $4 to $69, which assumes a multiple of 28 times our 2005 EPS estimate of $2.48, at the low end of the chewing gum manufacturer's historical forward p-e range.

McAfee (MFE ): Reiterates 4 STARS (accumulate)

Analyst: Jonathan Rudy, CFA

McAfee's second-quarter operating earnings per share of 8 cents, vs. 11 cents one year earlier, is 2 cents better than our estimate. Revenues of $226 million were also better than our estimate. McAfee experienced strength in consumer and large enterprise business segments. After the recent sale of Sniffer business unit, McAfee has $1.1 billion in cash and investments, or about $6.00 per share. We are raising our 2004 and 2005 operating earnings per share estimates to 51 cents and 90 cents, from 47 cents and 88 cents, respectively. With McAfee now focused on its core Internet Security business, and the stock trading at a discount to peers with an enterprise value-to-sales ratio of 2.5 times, we believe the shares are attractive.

LSI Logic (LSI ): Reiterates 3 STARS (hold)

Thomas Smith, CFA

LSI posted second-quarter pro forma earnings per share of 7 cents (GAAP earnings per share of 2 cents), vs. a loss of 2 cents (GAAP loss of 43 cents), which is in line with our estimate. Revenues rose 10%, dipping 1% sequentially, as the company's storage unit suffers industry softness that we expect to linger through the third quarter. We view the pending spin-off of the storage unit as a plus. We are lowering our pro forma earnings per share estimates to 29 cents (S&P Core loss 43 cents) from 37 cents for 2004, and to 50 cents (Core loss of 19 cents) from 55 cents for 2005. We are lowering our 12-month target price to $7 from $8, based on our price-to-sales and price-to-earnings analyses.

Nationwide Health Properties (NHP ): Keeps 4 STARS (accumulate)

Analyst: Robert McMillan

Nationwide posted earnings per share of 23 cents, vs. 22 cents, one cent below our estimate, while funds from operations share of 42 cents was in line. Although rental income and earnings rose, results were hampered by a 31% jump in shares outstanding, used partially to fund acquisitions aimed at fueling future growth. Operating trends among Nationwide's tenants look set to continue improving as operating pressures lessen. In our opinion, Nationwide should be able to realize higher net rent growth. We see 2004 funds from operations per share of $1.66, and $1.83 in 2005. We are raising our 12-month target price to $21 from $20, on our price-to-funds from operations analysis.

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