S&P Keeps Sell on Siebel

Plus analysts' opinions on Alcoa, Cnooc, and more

Siebel Systems (SEBL ): Maintains 2 STARS (sell)

Analyst: Zaineb Bokhari

Siebel announces preliminary second-quarter revenue of $312 million to $314 million, in line with our forecast but at the low end of company guidance. Licenses fell about 18%, reflecting long sales cycles and delayed deals. Services grew above plan, aided by On Demand initiatives. We see operating margins widening in the second half as Siebel cuts costs. However, we continue to expect interest income from the company's liquid balance sheet to account for a sizeable portion of earnings per share. We are lowering our 2005 and 2006 earnings per share estimates to 17 cents and 22 cents, from 20 cents and 25 cents. Our 12-month target price remains $7.50.

Alcoa (AA ): Reiterates 4 STARS (buy)

Analyst: Leo Larkin

Alcoa posted second-quarter earnings per share of 46 cents, before 8 cents in special gains, vs. 46 cents on a 13% sales, as earnings per share lagged sales due to margin pressure. We are cutting our full 2005 earnings per share estimate to $1.80 from $1.90 because of our belief that lower prices for alumina and aluminum and rising raw material costs will offset strength in downstream units and cost cutting. But we are keeping our $2.31 2006 earnings per share estimate on our expectation for a rebound in the aluminum price on lower Chinese exports, some moderation of raw material costs, and higher volume. Our 12-month target price remains $33.

Cnooc Ltd. (CEO ): Maintains 3 STARS (hold)

Analyst: Charles LaPorta

We are raising our 2005 and 2006 earnings per share estimates both to $6.80, from $5.85 and $5.71, respectively. The increases reflect higher expected average selling prices for hydrocarbons. With the uncertainty over the Unocal bid is likely to overhang on CEO's shares, we maintain our hold recommendation, but lift our discounted-cash-flowderived 12-month target price to $63. We have discounted our projections on CEO's five-year free cash flow at 10% and valued remaining reserves at an assumed long term average crude price of $39 per barrel. Our current projections exclude any Unocal impact.

AllState (ALL ): Maintains 5 STARS (strong buy)

Analyst: Catherine Seifert

AllState is among insurers likely to be hit with claims as Hurricane Dennis (now a category 4 storm) moves toward Florida panhandle. Despite this, we view AllState shares as undervalued vs. peers and have a 12-month target price of $70, or 11 times our 2006 earnings per share estimate of $6.35. Other insurers are likely to face claims from Dennis include Chubb, Hartford, SAFECO, and St. Paul Travelers. We remain neutral on the group, since we do not think valuations reflect our concern about premium softness and reserve adequacy.

Polo Ralph Lauren (RL ): Upgrades to 4 STARS (buy) from 3 STARS (hold)

Analyst: Marilyn Driscoll, CFA

We are increasing our June-quarter earnings per share estimate by 10 cents, to 35 cents, based on operating margin expansion we expect of 500 to 550 basis points. For fiscal 2006 (ending March) and fiscal 2007, we are raising our earnings per share estimates to $2.93 and $3.25, from $2.82 and $3.20, respectively. We are raising our target price to $55 from $46, based on a p-e of about 17 times our 2006 estimate. We anticipate continued brand momentum as RL executes a re-invigoration strategy, and goes further upscale. We regard the company's purchases of licenses as a plus and see opportunity at mass retail via the Chaps line.

Accenture (ACN ): Maintains 4 STARS (buy)

Analyst: Stephanie Crane

Accenture posted May-quarter earnings per share of 51 cents, vs. 37 cents, above our estimate of 36 cents. Revenue rose 11% to $4 billion, with strength in consulting (60%-plus of revenue), along with solid momentum we see as especially positive. Bookings reached $3.96 billion, and we see Accenture beating its fiscal 2005 (ending August) goal of $18 billion to $20 billion. We note the raised guidance for fiscal 2005 includes a reduction in reorganization liabilities. We account for this in our estimate for fiscal 2005, which we are raising to $1.40 from $1.38. Our 12-month target price remains $30, slightly above peer p-e 19 times our fiscal 2006 earnings per share estimate of $1.55.

JetBlue Airways (JBLU ): Reiterates 3 STARS (hold)

Analyst: Jim Corridore

According to a Reuters report, JetBlue CEO David Neeleman says JetBlue can continue to be profitable. This does not come as a surprise to us, given the company's low-cost position, strong revenue growth and young jet fleet. However, we see high oil prices and price competition on the east coast pressuring operating margins. Oil prices have risen about $10 per barrel in the past few weeks. We are cutting our earnings per share estimates for 2005 to 30 cents from 40 cents, and for 2006 to 50 cents from 57 cents. Trading at 40 times our 2006 earnings per share estimate, we do not expect JetBlue to outpace the S&P MidCap 400 over the next year.

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