S&P Cuts RSA Security to Sell from Hold

Plus: analysts start covering Cell Genesys, comment on UTStarcom's corporate governance issues, and more

From Standard & Poor's Equity Research

Standard & Poor's Equity Research

RSA Security (RSAS) : Cuts to 2 STARS (sell) from 3 STARS (hold)

Analyst: Clyde Montevirgen

After RSA's recent announcement of a subpoena from the U.S. Attorney for the Southern District of New York requesting records relating to stock option grants, we conducted an analysis of the company's option granting practices. We are now concerned about potential consequences of the subpoena. We believe potential repercussions include additional legal and accounting expenses, financial restatements and other penalties. Our 12-month target price falls to $15 from $20.

Cell Genesys (CEGE) : Starts at 3 STARS (hold)

Analyst: Cameron Lavey

Cell Genesys is a development-stage biotech company focused on cancer therapies. The company's lead product candidate, a treatment for prostate cancer, is currently in Phase 3 testing; if approved, we see a launch in 2010. Cell Genesys also has a collaboration agreement with Novartis (NVS), which provides reimbursement for some Research & Development expenses. While we are encouraged by initial clinical results for several of Cell Genesys's pipeline products, we think shares are fairly valued at current levels. We see a loss of $1.55 in 2006 and a loss of $2.27 in 2007. Our 12-month target price is $6.

UTStarcom (UTSI) : Reiterates 2 STARS (sell)

Analyst: Ari Bensinger

UTStarcom requests a seven-day filing date extension for its March quarter 10-Q because it needs additional time to complete its quarterly close process. Given the recent financial statement filing delays and premature revenue recognition issues, we think UTStarcom faces a long road ahead to win back investor confidence. We also are wary of ongoing government investigations related to financial disclosures and possible violations of the foreign corrupt practice act. Our 12-month target price remains $5.

Pier 1 Imports (PIR) : Ups to 3 STARS (hold) from 2 STARS (sell)

Analyst: Michael Souers

Pier 1 Imports posts May quarter net loss from continuing operations of 26 cents vs. loss of 10 cents, in line with our estimate. Comp-store sales fell 6.6% and Pier 1 is guiding for double-digit comp declines in June. While we still expect near-term weakness from the company due to weak customer traffic and mounting macroeconomic concerns, we are pleased with the drop in inventory and we expect promotional activity to be more subdued than a year ago. Our fiscal year 2007 (ending February) and fiscal year 2008 net loss estimates widen to 36 cents and 12 cents, respectively, from 33 cents and 6 cents losses. Our target price remains $8.

CBL & Associates Properties (CBL) : Ups to 4 STARS (buy) from 3 STARS (hold)

Analyst: Robert McMillan

After recent declines, which in our opinion were based on concerns about potential increases in interest rates, we think CBL shares have attractive appreciation potential. With most of the company's debt fixed and with long-term leases in place for most of its portfolio, we look for operating results to continue growing at a robust level, driven by continued retailer expansion and new developments. We are keeping our 2006 and 2007 per-share funds from operations estimates at $3.35 and $3.61, respectively, and our 12-month target price at $44.

Bandag (BDG) : Ups to 3 STARS (hold) from 1 STAR (strong sell)

Analyst: Efraim Levy, CFA

We expect Bandag's planned pension plan changes and labor reduction programs to materially improve earnings. We are initiating our 2007 earnings per share (EPS) estimate at $3.16, after estimated cost savings of 58 cents from these programs. Our estimate assumes improvement in raw material pricing in 2007. We are raising our 12-month target price to $41 from $32, which is based on 13 times our 2007 EPS forecast. We are encouraged by Bandag's balance sheet strength and steadily rising dividend. Still, with recent unfavorable operating trends and risks to our estimate, we would not add to positions.

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