Markets & Finance

S&P Upgrades Jones Apparel to Accumulate


Exxon Mobil (XOM): Maintains 5 STARS (buy)

Analyst: Tina Vital

The company posted third quarter EPS of 44 cents vs. 48 cents, before special items -- a penny above the Street's estimates. Before special items, earnings from exploration & production rose 13% on higher crude prices; refining & marketing fell 87% on depressed industry margins; and chemicals climbed 126% on higher volumes. Barrel of oil equivalent production rose 1.9%; excluding OPEC quotas, up about 3%; and targets are on track. S&P sees 2002 results at $1.66, and sees 2003 results at $2.03. With demand improving, a strong return on investment and international and business diversification, Exxon warrants premium valuation

Chevron Texaco (CVX): Maintains 3 STARS (hold)

Analyst: Tina Vital

The company posted third quarter earnings per share of $1.16 vs. $1.60, before net special charges of $2.01 vs. five cents -- 13 cents below the Street's estimates. Before special items, operating earnings from exploration & production segment was flat, refining & marketing earnings fell 84%, and chemicals had $22 million in earnings vs. a $5 million loss. Special charges included a $1.095 billion write-down of the Dynegy investment (book value of $412 million on Sept. 30); $454 million for Chevron's share of Dynegy's writedowns; and $73 million in merger charges. S&P see 2002 at $4.48, and sees 2003 at $5.20. With below-average return on investment, S&P says hold Chevron.

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

Analyst: Tuna Amobi

Jones posted third quarter earnings per share of $1.01 vs. $0.96, both before charges, above the Street's mean. A modest upturn is likely at "moderate" and wholesale footwear and accessories businesses. Career and casual wear should gain, but the "better" segment could be challenged. S&P is raising its 2002 earnings per share estimate by six cents to $2.80, and sees $3.05 in 2003, with earnings per share quality better after five cents to seven cents of an initial stock options expense. S&P sees $450 million of free cash in 2003, employable for acquisitions and share buybacks. Jones has appeal at 11 times S&P's 2003 earnings per share estimate, below the S&P 500.

Constellation Energy Group (CEG): Reiterates 3 STARS (hold)

Analyst: James McCann

Constellation posted third quarter operating earnings per share of $1.07 vs. $1, in line. Results exclude charges of 15 cents tied to write-downs, business closings, and workforce reductions. Income at Baltimore Gas & Electric rose five cents to 20 cents, aided by warmer weather and a lower interest expense. Merchant energy business was flat at 89 cents, as the acquisition of a nuclear unit and the end of earnings sharing with Goldman Sachs was offset by decreased mark-to-market results and lower industrial contribution. S&P views Constellation as fairly valued at nine times S&P's $2.75 2003 earnings per share estimate.

Aon (AOC): Downgrades to 2 STARS (avoid) from 3 STARS (hold)

Analyst: Catherine Seifert

S&P anticipates share weakness after Aon reported lower than expected third quarter earnings per share of $0.42 vs. $0.38. Revenues rose 17%, but margins in every unit are under pressure. Aon is ending efforts to sell/spinoff its underwriting unit. Aon is shoring up its capital base by cutting its quarterly dividend 33%, and it plans to raise $1 billion to refinance/restructure debt. S&P is cutting its 2002 earnings per share estimate $0.20 to $1.45, and tentatively sees $1.75 earnings per share in 2003 given a $130 million to $160 million estimated increase in pension costs. S&P would not commit resources to Aon.

Goldman Sachs (GS), Merrill Lynch (MER) and Morgan Stanley (MWD): Maintains 3 STARS (hold)

Analyst: Robert McMillan

The Financial Times says that several Wall Street firms and regulators have agreed to settle conflicts of interest allegations by contributing up to about $1 billion to fund independent research and to further restrict contacts between research and investment banking departments. This deal should reduce regulatory and legal clouds. However, business conditions still remain very difficult, especially for corporate finance activity. S&P is reviewing the earnings per share estimates.

Applebee's International (APPB): Maintains 5 STARS (buy)

Analyst: Dennis Milton

Applebee's posted September quarter earnings per share of 37 cents, up 25% from a year ago and a penny ahead of S&P's estimate. Results benefited from expansion, same-store sales growth of 2.8%, low food costs, and the elimination of goodwill amortization. S&P is raising its 2002 earnings per share estimate by a penny, to $1.46. The company also reported surprisingly robust October same-store sales growth of 4.1%. At 15 times S&P's 2003 earnings per share estimate of $1.64, Applebee's is in line with peers, despite superior long-term return on equity performance and excellent growth prospects.

Spinnaker Exploration (SKE): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: James Kartsonas

The company posted third quarter earnings per share of 0.21 vs. $0.38 -- four cents above S&P's estimates. Volumes rose 39% from the second quarter and 4% from year ago. However, Spinnaker reduced its production guidance for 2003 to 50-57 Bcfe, well below S&P's expectations, about in line with the 2002-estimated total production. S&P raised its 2002 earnings per share estimate to $0.91 from $0.77, but is reducing 2003's to 84 cents from $1.35. Spinnaker is trading at 4.1 times S&P's estimate of 2003 discretionary cash flow, in line with peers. S&P sees shares as fairly valued given its poor production growth. Exxon Mobil (XOM): Maintains 5 STARS (buy)

Analyst: Tina Vital

The company posted third quarter EPS of 44 cents vs. 48 cents, before special items -- a penny above the Street's estimates. Before special items, earnings from exploration & production rose 13% on higher crude prices; refining & marketing fell 87% on depressed industry margins; and chemicals climbed 126% on higher volumes. Barrel of oil equivalent production rose 1.9%; excluding OPEC quotas, up about 3%; and targets are on track. S&P sees 2002 results at $1.66, and sees 2003 results at $2.03. With demand improving, a strong return on investment and international and business diversification, Exxon warrants premium valuation

Chevron Texaco (CVX): Maintains 3 STARS (hold)

Analyst: Tina Vital

The company posted third quarter earnings per share of $1.16 vs. $1.60, before net special charges of $2.01 vs. five cents -- 13 cents below the Street's estimates. Before special items, operating earnings from exploration & production segment was flat, refining & marketing earnings fell 84%, and chemicals had $22 million in earnings vs. a $5 million loss. Special charges included a $1.095 billion write-down of the Dynegy investment (book value of $412 million on Sept. 30); $454 million for Chevron's share of Dynegy's writedowns; and $73 million in merger charges. S&P see 2002 at $4.48, and sees 2003 at $5.20. With below-average return on investment, S&P says hold Chevron.

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

Analyst: Tuna Amobi

Jones posted third quarter earnings per share of $1.01 vs. $0.96, both before charges, above the Street's mean. A modest upturn is likely at "moderate" and wholesale footwear and accessories businesses. Career and casual wear should gain, but the "better" segment could be challenged. S&P is raising its 2002 earnings per share estimate by six cents to $2.80, and sees $3.05 in 2003, with earnings per share quality better after five cents to seven cents of an initial stock options expense. S&P sees $450 million of free cash in 2003, employable for acquisitions and share buybacks. Jones has appeal at 11 times S&P's 2003 earnings per share estimate, below the S&P 500.

Constellation Energy Group (CEG): Reiterates 3 STARS (hold)

Analyst: James McCann

Constellation posted third quarter operating earnings per share of $1.07 vs. $1, in line. Results exclude charges of 15 cents tied to write-downs, business closings, and workforce reductions. Income at Baltimore Gas & Electric rose five cents to 20 cents, aided by warmer weather and a lower interest expense. Merchant energy business was flat at 89 cents, as the acquisition of a nuclear unit and the end of earnings sharing with Goldman Sachs was offset by decreased mark-to-market results and lower industrial contribution. S&P views Constellation as fairly valued at nine times S&P's $2.75 2003 earnings per share estimate.

Aon (AOC): Downgrades to 2 STARS (avoid) from 3 STARS (hold)

Analyst: Catherine Seifert

S&P anticipates share weakness after Aon reported lower than expected third quarter earnings per share of $0.42 vs. $0.38. Revenues rose 17%, but margins in every unit are under pressure. Aon is ending efforts to sell/spinoff its underwriting unit. Aon is shoring up its capital base by cutting its quarterly dividend 33%, and it plans to raise $1 billion to refinance/restructure debt. S&P is cutting its 2002 earnings per share estimate $0.20 to $1.45, and tentatively sees $1.75 earnings per share in 2003 given a $130 million to $160 million estimated increase in pension costs. S&P would not commit resources to Aon.

Goldman Sachs (GS), Merrill Lynch (MER) and Morgan Stanley (MWD): Maintains 3 STARS (hold)

Analyst: Robert McMillan

The Financial Times says that several Wall Street firms and regulators have agreed to settle conflicts of interest allegations by contributing up to about $1 billion to fund independent research and to further restrict contacts between research and investment banking departments. This deal should reduce regulatory and legal clouds. However, business conditions still remain very difficult, especially for corporate finance activity. S&P is reviewing the earnings per share estimates.

Applebee's International (APPB): Maintains 5 STARS (buy)

Analyst: Dennis Milton

Applebee's posted September quarter earnings per share of 37 cents, up 25% from a year ago and a penny ahead of S&P's estimate. Results benefited from expansion, same-store sales growth of 2.8%, low food costs, and the elimination of goodwill amortization. S&P is raising its 2002 earnings per share estimate by a penny, to $1.46. The company also reported surprisingly robust October same-store sales growth of 4.1%. At 15 times S&P's 2003 earnings per share estimate of $1.64, Applebee's is in line with peers, despite superior long-term return on equity performance and excellent growth prospects.

Spinnaker Exploration (SKE): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: James Kartsonas

The company posted third quarter earnings per share of 0.21 vs. $0.38 -- four cents above S&P's estimates. Volumes rose 39% from the second quarter and 4% from year ago. However, Spinnaker reduced its production guidance for 2003 to 50-57 Bcfe, well below S&P's expectations, about in line with the 2002-estimated total production. S&P raised its 2002 earnings per share estimate to $0.91 from $0.77, but is reducing 2003's to 84 cents from $1.35. Spinnaker is trading at 4.1 times S&P's estimate of 2003 discretionary cash flow, in line with peers. S&P sees shares as fairly valued given its poor production growth. Exxon Mobil (XOM): Maintains 5 STARS (buy)

Analyst: Tina Vital

The company posted third quarter EPS of 44 cents vs. 48 cents, before special items -- a penny above the Street's estimates. Before special items, earnings from exploration & production rose 13% on higher crude prices; refining & marketing fell 87% on depressed industry margins; and chemicals climbed 126% on higher volumes. Barrel of oil equivalent production rose 1.9%; excluding OPEC quotas, up about 3%; and targets are on track. S&P sees 2002 results at $1.66, and sees 2003 results at $2.03. With demand improving, a strong return on investment and international and business diversification, Exxon warrants premium valuation

Chevron Texaco (CVX): Maintains 3 STARS (hold)

Analyst: Tina Vital

The company posted third quarter earnings per share of $1.16 vs. $1.60, before net special charges of $2.01 vs. five cents -- 13 cents below the Street's estimates. Before special items, operating earnings from exploration & production segment was flat, refining & marketing earnings fell 84%, and chemicals had $22 million in earnings vs. a $5 million loss. Special charges included a $1.095 billion write-down of the Dynegy investment (book value of $412 million on Sept. 30); $454 million for Chevron's share of Dynegy's writedowns; and $73 million in merger charges. S&P see 2002 at $4.48, and sees 2003 at $5.20. With below-average return on investment, S&P says hold Chevron.

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

Analyst: Tuna Amobi

Jones posted third quarter earnings per share of $1.01 vs. $0.96, both before charges, above the Street's mean. A modest upturn is likely at "moderate" and wholesale footwear and accessories businesses. Career and casual wear should gain, but the "better" segment could be challenged. S&P is raising its 2002 earnings per share estimate by six cents to $2.80, and sees $3.05 in 2003, with earnings per share quality better after five cents to seven cents of an initial stock options expense. S&P sees $450 million of free cash in 2003, employable for acquisitions and share buybacks. Jones has appeal at 11 times S&P's 2003 earnings per share estimate, below the S&P 500.

Constellation Energy Group (CEG): Reiterates 3 STARS (hold)

Analyst: James McCann

Constellation posted third quarter operating earnings per share of $1.07 vs. $1, in line. Results exclude charges of 15 cents tied to write-downs, business closings, and workforce reductions. Income at Baltimore Gas & Electric rose five cents to 20 cents, aided by warmer weather and a lower interest expense. Merchant energy business was flat at 89 cents, as the acquisition of a nuclear unit and the end of earnings sharing with Goldman Sachs was offset by decreased mark-to-market results and lower industrial contribution. S&P views Constellation as fairly valued at nine times S&P's $2.75 2003 earnings per share estimate.

Aon (AOC): Downgrades to 2 STARS (avoid) from 3 STARS (hold)

Analyst: Catherine Seifert

S&P anticipates share weakness after Aon reported lower than expected third quarter earnings per share of $0.42 vs. $0.38. Revenues rose 17%, but margins in every unit are under pressure. Aon is ending efforts to sell/spinoff its underwriting unit. Aon is shoring up its capital base by cutting its quarterly dividend 33%, and it plans to raise $1 billion to refinance/restructure debt. S&P is cutting its 2002 earnings per share estimate $0.20 to $1.45, and tentatively sees $1.75 earnings per share in 2003 given a $130 million to $160 million estimated increase in pension costs. S&P would not commit resources to Aon.

Goldman Sachs (GS), Merrill Lynch (MER) and Morgan Stanley (MWD): Maintains 3 STARS (hold)

Analyst: Robert McMillan

The Financial Times says that several Wall Street firms and regulators have agreed to settle conflicts of interest allegations by contributing up to about $1 billion to fund independent research and to further restrict contacts between research and investment banking departments. This deal should reduce regulatory and legal clouds. However, business conditions still remain very difficult, especially for corporate finance activity. S&P is reviewing the earnings per share estimates.

Applebee's International (APPB): Maintains 5 STARS (buy)

Analyst: Dennis Milton

Applebee's posted September quarter earnings per share of 37 cents, up 25% from a year ago and a penny ahead of S&P's estimate. Results benefited from expansion, same-store sales growth of 2.8%, low food costs, and the elimination of goodwill amortization. S&P is raising its 2002 earnings per share estimate by a penny, to $1.46. The company also reported surprisingly robust October same-store sales growth of 4.1%. At 15 times S&P's 2003 earnings per share estimate of $1.64, Applebee's is in line with peers, despite superior long-term return on equity performance and excellent growth prospects.

Spinnaker Exploration (SKE): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: James Kartsonas

The company posted third quarter earnings per share of 0.21 vs. $0.38 -- four cents above S&P's estimates. Volumes rose 39% from the second quarter and 4% from year ago. However, Spinnaker reduced its production guidance for 2003 to 50-57 Bcfe, well below S&P's expectations, about in line with the 2002-estimated total production. S&P raised its 2002 earnings per share estimate to $0.91 from $0.77, but is reducing 2003's to 84 cents from $1.35. Spinnaker is trading at 4.1 times S&P's estimate of 2003 discretionary cash flow, in line with peers. S&P sees shares as fairly valued given its poor production growth. Exxon Mobil (XOM): Maintains 5 STARS (buy)

Analyst: Tina Vital

The company posted third quarter EPS of 44 cents vs. 48 cents, before special items -- a penny above the Street's estimates. Before special items, earnings from exploration & production rose 13% on higher crude prices; refining & marketing fell 87% on depressed industry margins; and chemicals climbed 126% on higher volumes. Barrel of oil equivalent production rose 1.9%; excluding OPEC quotas, up about 3%; and targets are on track. S&P sees 2002 results at $1.66, and sees 2003 results at $2.03. With demand improving, a strong return on investment and international and business diversification, Exxon warrants premium valuation

Chevron Texaco (CVX): Maintains 3 STARS (hold)

Analyst: Tina Vital

The company posted third quarter earnings per share of $1.16 vs. $1.60, before net special charges of $2.01 vs. five cents -- 13 cents below the Street's estimates. Before special items, operating earnings from exploration & production segment was flat, refining & marketing earnings fell 84%, and chemicals had $22 million in earnings vs. a $5 million loss. Special charges included a $1.095 billion write-down of the Dynegy investment (book value of $412 million on Sept. 30); $454 million for Chevron's share of Dynegy's writedowns; and $73 million in merger charges. S&P see 2002 at $4.48, and sees 2003 at $5.20. With below-average return on investment, S&P says hold Chevron.

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

Analyst: Tuna Amobi

Jones posted third quarter earnings per share of $1.01 vs. $0.96, both before charges, above the Street's mean. A modest upturn is likely at "moderate" and wholesale footwear and accessories businesses. Career and casual wear should gain, but the "better" segment could be challenged. S&P is raising its 2002 earnings per share estimate by six cents to $2.80, and sees $3.05 in 2003, with earnings per share quality better after five cents to seven cents of an initial stock options expense. S&P sees $450 million of free cash in 2003, employable for acquisitions and share buybacks. Jones has appeal at 11 times S&P's 2003 earnings per share estimate, below the S&P 500.

Constellation Energy Group (CEG): Reiterates 3 STARS (hold)

Analyst: James McCann

Constellation posted third quarter operating earnings per share of $1.07 vs. $1, in line. Results exclude charges of 15 cents tied to write-downs, business closings, and workforce reductions. Income at Baltimore Gas & Electric rose five cents to 20 cents, aided by warmer weather and a lower interest expense. Merchant energy business was flat at 89 cents, as the acquisition of a nuclear unit and the end of earnings sharing with Goldman Sachs was offset by decreased mark-to-market results and lower industrial contribution. S&P views Constellation as fairly valued at nine times S&P's $2.75 2003 earnings per share estimate.

Aon (AOC): Downgrades to 2 STARS (avoid) from 3 STARS (hold)

Analyst: Catherine Seifert

S&P anticipates share weakness after Aon reported lower than expected third quarter earnings per share of $0.42 vs. $0.38. Revenues rose 17%, but margins in every unit are under pressure. Aon is ending efforts to sell/spinoff its underwriting unit. Aon is shoring up its capital base by cutting its quarterly dividend 33%, and it plans to raise $1 billion to refinance/restructure debt. S&P is cutting its 2002 earnings per share estimate $0.20 to $1.45, and tentatively sees $1.75 earnings per share in 2003 given a $130 million to $160 million estimated increase in pension costs. S&P would not commit resources to Aon.

Goldman Sachs (GS), Merrill Lynch (MER) and Morgan Stanley (MWD): Maintains 3 STARS (hold)

Analyst: Robert McMillan

The Financial Times says that several Wall Street firms and regulators have agreed to settle conflicts of interest allegations by contributing up to about $1 billion to fund independent research and to further restrict contacts between research and investment banking departments. This deal should reduce regulatory and legal clouds. However, business conditions still remain very difficult, especially for corporate finance activity. S&P is reviewing the earnings per share estimates.

Applebee's International (APPB): Maintains 5 STARS (buy)

Analyst: Dennis Milton

Applebee's posted September quarter earnings per share of 37 cents, up 25% from a year ago and a penny ahead of S&P's estimate. Results benefited from expansion, same-store sales growth of 2.8%, low food costs, and the elimination of goodwill amortization. S&P is raising its 2002 earnings per share estimate by a penny, to $1.46. The company also reported surprisingly robust October same-store sales growth of 4.1%. At 15 times S&P's 2003 earnings per share estimate of $1.64, Applebee's is in line with peers, despite superior long-term return on equity performance and excellent growth prospects.

Spinnaker Exploration (SKE): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: James Kartsonas

The company posted third quarter earnings per share of 0.21 vs. $0.38 -- four cents above S&P's estimates. Volumes rose 39% from the second quarter and 4% from year ago. However, Spinnaker reduced its production guidance for 2003 to 50-57 Bcfe, well below S&P's expectations, about in line with the 2002-estimated total production. S&P raised its 2002 earnings per share estimate to $0.91 from $0.77, but is reducing 2003's to 84 cents from $1.35. Spinnaker is trading at 4.1 times S&P's estimate of 2003 discretionary cash flow, in line with peers. S&P sees shares as fairly valued given its poor production growth. Exxon Mobil (XOM): Maintains 5 STARS (buy)

Analyst: Tina Vital

The company posted third quarter EPS of 44 cents vs. 48 cents, before special items -- a penny above the Street's estimates. Before special items, earnings from exploration & production rose 13% on higher crude prices; refining & marketing fell 87% on depressed industry margins; and chemicals climbed 126% on higher volumes. Barrel of oil equivalent production rose 1.9%; excluding OPEC quotas, up about 3%; and targets are on track. S&P sees 2002 results at $1.66, and sees 2003 results at $2.03. With demand improving, a strong return on investment and international and business diversification, Exxon warrants premium valuation

Chevron Texaco (CVX): Maintains 3 STARS (hold)

Analyst: Tina Vital

The company posted third quarter earnings per share of $1.16 vs. $1.60, before net special charges of $2.01 vs. five cents -- 13 cents below the Street's estimates. Before special items, operating earnings from exploration & production segment was flat, refining & marketing earnings fell 84%, and chemicals had $22 million in earnings vs. a $5 million loss. Special charges included a $1.095 billion write-down of the Dynegy investment (book value of $412 million on Sept. 30); $454 million for Chevron's share of Dynegy's writedowns; and $73 million in merger charges. S&P see 2002 at $4.48, and sees 2003 at $5.20. With below-average return on investment, S&P says hold Chevron.

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

Analyst: Tuna Amobi

Jones posted third quarter earnings per share of $1.01 vs. $0.96, both before charges, above the Street's mean. A modest upturn is likely at "moderate" and wholesale footwear and accessories businesses. Career and casual wear should gain, but the "better" segment could be challenged. S&P is raising its 2002 earnings per share estimate by six cents to $2.80, and sees $3.05 in 2003, with earnings per share quality better after five cents to seven cents of an initial stock options expense. S&P sees $450 million of free cash in 2003, employable for acquisitions and share buybacks. Jones has appeal at 11 times S&P's 2003 earnings per share estimate, below the S&P 500.

Constellation Energy Group (CEG): Reiterates 3 STARS (hold)

Analyst: James McCann

Constellation posted third quarter operating earnings per share of $1.07 vs. $1, in line. Results exclude charges of 15 cents tied to write-downs, business closings, and workforce reductions. Income at Baltimore Gas & Electric rose five cents to 20 cents, aided by warmer weather and a lower interest expense. Merchant energy business was flat at 89 cents, as the acquisition of a nuclear unit and the end of earnings sharing with Goldman Sachs was offset by decreased mark-to-market results and lower industrial contribution. S&P views Constellation as fairly valued at nine times S&P's $2.75 2003 earnings per share estimate.

Aon (AOC): Downgrades to 2 STARS (avoid) from 3 STARS (hold)

Analyst: Catherine Seifert

S&P anticipates share weakness after Aon reported lower than expected third quarter earnings per share of $0.42 vs. $0.38. Revenues rose 17%, but margins in every unit are under pressure. Aon is ending efforts to sell/spinoff its underwriting unit. Aon is shoring up its capital base by cutting its quarterly dividend 33%, and it plans to raise $1 billion to refinance/restructure debt. S&P is cutting its 2002 earnings per share estimate $0.20 to $1.45, and tentatively sees $1.75 earnings per share in 2003 given a $130 million to $160 million estimated increase in pension costs. S&P would not commit resources to Aon.

Goldman Sachs (GS), Merrill Lynch (MER) and Morgan Stanley (MWD): Maintains 3 STARS (hold)

Analyst: Robert McMillan

The Financial Times says that several Wall Street firms and regulators have agreed to settle conflicts of interest allegations by contributing up to about $1 billion to fund independent research and to further restrict contacts between research and investment banking departments. This deal should reduce regulatory and legal clouds. However, business conditions still remain very difficult, especially for corporate finance activity. S&P is reviewing the earnings per share estimates.

Applebee's International (APPB): Maintains 5 STARS (buy)

Analyst: Dennis Milton

Applebee's posted September quarter earnings per share of 37 cents, up 25% from a year ago and a penny ahead of S&P's estimate. Results benefited from expansion, same-store sales growth of 2.8%, low food costs, and the elimination of goodwill amortization. S&P is raising its 2002 earnings per share estimate by a penny, to $1.46. The company also reported surprisingly robust October same-store sales growth of 4.1%. At 15 times S&P's 2003 earnings per share estimate of $1.64, Applebee's is in line with peers, despite superior long-term return on equity performance and excellent growth prospects.

Spinnaker Exploration (SKE): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: James Kartsonas

The company posted third quarter earnings per share of 0.21 vs. $0.38 -- four cents above S&P's estimates. Volumes rose 39% from the second quarter and 4% from year ago. However, Spinnaker reduced its production guidance for 2003 to 50-57 Bcfe, well below S&P's expectations, about in line with the 2002-estimated total production. S&P raised its 2002 earnings per share estimate to $0.91 from $0.77, but is reducing 2003's to 84 cents from $1.35. Spinnaker is trading at 4.1 times S&P's estimate of 2003 discretionary cash flow, in line with peers. S&P sees shares as fairly valued given its poor production growth. Exxon Mobil (XOM): Maintains 5 STARS (buy)

Analyst: Tina Vital

The company posted third quarter EPS of 44 cents vs. 48 cents, before special items -- a penny above the Street's estimates. Before special items, earnings from exploration & production rose 13% on higher crude prices; refining & marketing fell 87% on depressed industry margins; and chemicals climbed 126% on higher volumes. Barrel of oil equivalent production rose 1.9%; excluding OPEC quotas, up about 3%; and targets are on track. S&P sees 2002 results at $1.66, and sees 2003 results at $2.03. With demand improving, a strong return on investment and international and business diversification, Exxon warrants premium valuation

Chevron Texaco (CVX): Maintains 3 STARS (hold)

Analyst: Tina Vital

The company posted third quarter earnings per share of $1.16 vs. $1.60, before net special charges of $2.01 vs. five cents -- 13 cents below the Street's estimates. Before special items, operating earnings from exploration & production segment was flat, refining & marketing earnings fell 84%, and chemicals had $22 million in earnings vs. a $5 million loss. Special charges included a $1.095 billion write-down of the Dynegy investment (book value of $412 million on Sept. 30); $454 million for Chevron's share of Dynegy's writedowns; and $73 million in merger charges. S&P see 2002 at $4.48, and sees 2003 at $5.20. With below-average return on investment, S&P says hold Chevron.

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

Analyst: Tuna Amobi

Jones posted third quarter earnings per share of $1.01 vs. $0.96, both before charges, above the Street's mean. A modest upturn is likely at "moderate" and wholesale footwear and accessories businesses. Career and casual wear should gain, but the "better" segment could be challenged. S&P is raising its 2002 earnings per share estimate by six cents to $2.80, and sees $3.05 in 2003, with earnings per share quality better after five cents to seven cents of an initial stock options expense. S&P sees $450 million of free cash in 2003, employable for acquisitions and share buybacks. Jones has appeal at 11 times S&P's 2003 earnings per share estimate, below the S&P 500.

Constellation Energy Group (CEG): Reiterates 3 STARS (hold)

Analyst: James McCann

Constellation posted third quarter operating earnings per share of $1.07 vs. $1, in line. Results exclude charges of 15 cents tied to write-downs, business closings, and workforce reductions. Income at Baltimore Gas & Electric rose five cents to 20 cents, aided by warmer weather and a lower interest expense. Merchant energy business was flat at 89 cents, as the acquisition of a nuclear unit and the end of earnings sharing with Goldman Sachs was offset by decreased mark-to-market results and lower industrial contribution. S&P views Constellation as fairly valued at nine times S&P's $2.75 2003 earnings per share estimate.

Aon (AOC): Downgrades to 2 STARS (avoid) from 3 STARS (hold)

Analyst: Catherine Seifert

S&P anticipates share weakness after Aon reported lower than expected third quarter earnings per share of $0.42 vs. $0.38. Revenues rose 17%, but margins in every unit are under pressure. Aon is ending efforts to sell/spinoff its underwriting unit. Aon is shoring up its capital base by cutting its quarterly dividend 33%, and it plans to raise $1 billion to refinance/restructure debt. S&P is cutting its 2002 earnings per share estimate $0.20 to $1.45, and tentatively sees $1.75 earnings per share in 2003 given a $130 million to $160 million estimated increase in pension costs. S&P would not commit resources to Aon.

Goldman Sachs (GS), Merrill Lynch (MER) and Morgan Stanley (MWD): Maintains 3 STARS (hold)

Analyst: Robert McMillan

The Financial Times says that several Wall Street firms and regulators have agreed to settle conflicts of interest allegations by contributing up to about $1 billion to fund independent research and to further restrict contacts between research and investment banking departments. This deal should reduce regulatory and legal clouds. However, business conditions still remain very difficult, especially for corporate finance activity. S&P is reviewing the earnings per share estimates.

Applebee's International (APPB): Maintains 5 STARS (buy)

Analyst: Dennis Milton

Applebee's posted September quarter earnings per share of 37 cents, up 25% from a year ago and a penny ahead of S&P's estimate. Results benefited from expansion, same-store sales growth of 2.8%, low food costs, and the elimination of goodwill amortization. S&P is raising its 2002 earnings per share estimate by a penny, to $1.46. The company also reported surprisingly robust October same-store sales growth of 4.1%. At 15 times S&P's 2003 earnings per share estimate of $1.64, Applebee's is in line with peers, despite superior long-term return on equity performance and excellent growth prospects.

Spinnaker Exploration (SKE): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: James Kartsonas

The company posted third quarter earnings per share of 0.21 vs. $0.38 -- four cents above S&P's estimates. Volumes rose 39% from the second quarter and 4% from year ago. However, Spinnaker reduced its production guidance for 2003 to 50-57 Bcfe, well below S&P's expectations, about in line with the 2002-estimated total production. S&P raised its 2002 earnings per share estimate to $0.91 from $0.77, but is reducing 2003's to 84 cents from $1.35. Spinnaker is trading at 4.1 times S&P's estimate of 2003 discretionary cash flow, in line with peers. S&P sees shares as fairly valued given its poor production growth.


Steve Ballmer, Power Forward
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