S&P Boosts Outlook on Wireless Telecoms

Plus: Downgrades of Gannett and Infosys, and analyst opinions on Microsoft and other stocks

From Standard & Poor's Equity Research

Wireless Telecom Subindustry: Ups to Positive from Neutral

Analyst: Kenneth Leon, CPA

We believe leading wireless carriers in developed countries will generate strong cash flow despite high-market penetration in their respective countries, while wireless carriers in emerging markets should continue to realize double-digit subscriber and revenue growth with improving margins and profitability. We see opportunities to use growing free cash flow to invest in the business and enhance shareholder value through stock repurchases or special dividends. Besides Sprint Nextel (S), which we rank 5 STARS (strong buy), we view Tele Norte Participacoes (TNE), aslo ranked 5 STARS, and TIM Participacoes (TSU), ranked 4 STARS (buy), as well positioned.

Gannett Company (GCI) : Cuts to 3 STARS (hold) from 4 STARS (buy)

Analyst: James Peters, CFA

Gannett posts second quarter earnings per share (EPS) from continuing operations of $1.31 vs. $1.34, missing our estimate by two cents. Pro forma newspaper ad revenues rose 0.3%, while broadcast revenues grew 3.8%. Despite easier second half 2006 comparisons ahead for Gannett's UK Newsquest operations, we think a weak UK ad environment is likely to persist and weigh on Gannett's near-term results. We see no near-term catalyst for the stock. We are trimming our 2006 EPS estimate to $4.98 from $5.05. We are lowering our 12-month target price to $62 from $70.

Infosys (INFY) : Cuts to 3 STARS (hold) from 5 STARS (strong buy)

Analyst: Dylan Cathers

June quarter earnings per ADS of 62 cents vs. 43 cents are 4 cents ahead of our estimate, reflecting new client adds and a favorable U.S. dollar-Indian rupee exchange rate. We are raising our fiscal year 2007 (ending March) earnings per ADS estimate by 13 cents to $2.70, based on our expectation of rapid revenue growth, offset somewhat by rising wage and training expenses. Infosys shares are up in early trading, nearing what we view as an appropriate valuation, hence our downgrade. We are raising our 12-month target price by $5 to $90.

Microsoft (MSFT) : Reiterates 5 STARS (strong buy)

Analyst: Scott Kessler

As expected, the European Commission fines Microsoft some $358 million, related to the company's perceived non-compliance with a March 2004 decision requiring disclosure of certain interoperability information. Daily penalties of $3.7 million could accrue beginning July 31. Microsoft responds that it is committed to complying with the EC's 2004 decision but it does not see any fine, especially one as large as that which was levied, as appropriate. Microsoft contends that requirement specifics had been lacking until April 2006 and it is taking its case to the European courts. We think Microsoft's stance is reasonable.

Rinker (RIN) : Starts at 3 STARS (hold)

Analyst: Stuart Benway-CFA

From its facilities in U.S. and Australia, Rinker is a major worldwide producer of construction materials. It has a strong presence in robust markets of Florida, Arizona and Nevada, and has grown rapidly, partly via acquisitions, over the past four years. We expect U.S. residential construction spending to drop about 6% in calendar 2006 but see nonresidential spending rising 8.3%. We look for Rinker's profit growth to slow to 10% in fiscal year 2007 (ending March), reaching EPS of $4.40. Our 12-month target price is $68.

Massey Energy (MEE) : Maintains 4 STARS (buy)

Analyst: John F. Hingher-CFA

We are cutting our 12-month target price to $40 from $51, as lower natural gas prices and a mild spring have allowed utilities to rebuild inventories. We believe Massey Energy will benefit from low customer coal stockpiles, scarcity of competing fuels and increasing scrubber capacity.

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