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|  | DECEMBER 20, 2005
 S&P STOCK PICKS & PANS S&P Ups Marsh & Mclennan and Luby's, Cuts AstrazenecaPlus: Analysts comment on IBM's acquisition of Bowstreet and start covering OSI PharmaceuticalsMarsh & Mclennan (MMC ): Ups to 4 STARS (buy) from 3 STARS (hold) Analyst:Frank Braden We expect Marsh & Mclennan to continue to benefit from emphasis on cost controls and corporate restructuring, which we think should lead to margin expansion into the high teens in 2006. We are encouraged by improving staff and client retention rates and believe that increasing activity should lead to account growth in 2006. Net outflows at Putnam should begin to reverse, in our view. Our 2005 and 2006 operating earnings per share (EPS) estimates remain $1.70 and $2.10, respectively. We are raising our target price to $36 from $31, 17.1 times our 2006 operating EPS estimate. Astrazeneca (AZN ): Cuts to 2 STARS (sell) from 5 STARS (strong buy) Analyst: David Seemungal With the shares up 35% year-to-date in 2005, we think Astrazeneca's present valuation will be difficult to sustain in light of increased generic threats to key drugs such as Nexium, Seroquel and Pulmicort, as well as pipeline uncertainties. We think generic erosion coupled with the heavy costs needed to build what we see as a relatively weak pipeline will curtail EPS momentum in the coming years. Our target price falls by $5 to $46. International Business Machines (IBM ) : Reiterates 3 STARS (hold) Analyst: Megan Graham-Hackett IBM announced the acquisition of privately-held Bowstreet Inc. for an undisclosed amount. We believe the acquisition of Bowstreet's portal-based tools technology bolsters IBM's Websphere platform and think it contributes key components to IBM's integration capabilities within its SOA (service oriented architecture) strategy. We believe this strategy is gaining traction with corporations with significant legacy investments. There is no change to our estimates. We view IBM shares as fairly valued. Luby's (LUB ): Ups to 4 STARS (buy) from 3 STARS (hold) Analyst: William Mack, CFA Given recent declines in the shares, we now view Luby's valuation as attractive. Despite the stock's recent drop, we think there remains solid momentum at the company's cafeteria-style restaurant base. We look for same-store sales to rise almost 5% in fiscal year 2006 (ending August); our earnings per share (EPS) forecast for the year is still 80 cents, more than a 20% increase from fiscal year 2005's operating EPS. Our 12-month target price remains $16, in line with the company's historical average. OSI Pharmaceuticals (OSIP ): Starts coverage at 3 STARS (hold) Analyst: Frank DiLorenzo, CFA We are positive on prospects for OSI's Tarceva drug, but concerned over the competitive landscape for Macugen, assuming Genentech's (DNA ) Lucentis drug gets approved by the Food and Drug Administrationn by the end of 2006. We project U.S. Tarceva sales to be $280 million in 2005 and $419 million in 2006. We forecast U.S. Macugen sales of $190 million for 2005 and $267 million for 2006. We estimate losses per share of 34 cents for 2006 and 4 cents for 2007, including stock options expense in both years. Based on our net present value analysis (peak U.S. Tarceva sales of $767 million by 2010), our 12-month target price is $28.  All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is or will be, directly or indirectly related to the specific recommendations or views expressed in this research report. Standard & Poor's Regulatory Disclosure Any advice, analysis, or recommendations contained in articles labeled "Insight from Standard & Poor's" reflect the views of Standard & Poor's, which operates separately from and independently of BusinessWeek Online. It is possible that BWOL may from time to time publish information that is not consistent with advice, analysis, or recommendations that are published by Standard & Poor's. Standard & Poor's and BusinessWeek Online are each units of The McGraw-Hill Companies, Inc.
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