Monday September 30, 8:47 am ET

TheStreet Notes: A Daily Briefing of Research and Analyst Actions

CHANGE IN RATINGS
Rockwell Int'l Corp. (ROK / NYSE)
Merrill Lynch
We are reinstating coverage of Rockwell Automation with a Neutral rating. One of the world's leading suppliers of industrial automation products, systems, and services, Rockwell has sharpened its focus on the automation industry through a series of divestitures, spin-offs, and acquisitions in the past several years. We estimate FQ4 (September) EPS at $0.25, vs. $0.09, and sales at $994 million, vs.$974 million.

Raytheon Company (RTN / NYSE)
Weisel Partners
Raytheon We are downgrading from Attractive to Market Perform; E&C update reveals more delays and cost growth.

Sysco Corporation (SYY / NYSE)
Lehman Bros
Sysco; we are initiating coverage with a 2-Equal Weight rating. We feel it is a quality company with proven performance but with Street EPS fully loaded & the shrs near highs, we initiate with a 2 Sysco is #1 in the growing, $193b Foodservice Distribution industry with under 12% share; above-category internal sales & acq's should drive mkt share & 9-14% LT sales grth

Varco International (VRC / NYSE)
Morgan Stanley Co.
We initiate coverage on Varco with an Equal Weight rating. We view VRC as a well-positioned oil service mid-cap, with a business mix including both activity sensitive and backlog-driven components. Strong franchises and consistent FCF generation are highlights, in our view. We believe the valuation is reasonable but we see scope for significant appreciation if the oil service cycle develops as we envision.

Weight Watchers (WTW / NYSE)
Morgan Stanley Co.
We believe WTW's top-and bottom-line growth prospects are better than the peer group averages. We believe WTW's mostly variable-cost business model offers superior margins, and its FCF productivity and returns surpass those of its peers. We see a number of potential growth drivers. We initiate coverage with an Overweight-V rating.

Wyeth (WYE / NYSE)
Bear Stearns
We are reducing our EPS estimates to $2.25 (from $2.50) and $2.50 (from $2.76) for 2002 and 2003, respectively.

Wyeth (WYE / NYSE)
Prudential Securities
WYE's downward earnings revision for 2002 was bigger than we expected, but probably leaves 2003 in better shape - stock may stay in narrow range until clearer 2003 EPS guidance is given, hopefully in the Nov/Dec timeframe. We maintain our Buy rating recognizing the near-term volatility - we have new EPS estimates of $2.27 in 2002 (down from $2.52) and $2.57 in 2003 (down from $2.82), and a new price target of $38 (down from $45).

Wyeth (WYE / NYSE)
Bank of America Montgomery
We have lowered our rating to Market Performer from Strong Buy. While the shortfall in earnings related to the company's hormone replacement therapy (HRT) drugs Premarin and Prempro/Premphase were in line with our initial assessment, the company had an additional $0.17 to $0.21 shortfall related to issues in the vaccine, consumer, and animal health divisions.

STOCK COMMENTS / EPS CHANGES
AmeriCredit Corp. (ACF / NYSE)
Bear Stearns
We are lowering our price target to $19, given the significant dilution to EPS caused by the equity offering, but are maintaining our Outperform rating on ACF shares, as we believe they offer significant upside potential from these levels. Our fiscal 2003 estimate is $0.66 and our calendar 2003 estimate is $1.17. We estimate calendar 2004 EPS will be north of $2.00.

Bristol-Myers Squibb Co. (BMY / NYSE)
SG Cowen
Model revisions suggest transition period, new product rollouts, could clip EPS. Lowered sales forecasts by $290MM to $17.2B (-11%) in 2002, $550MM to $18.8B (+9%) in 2003, $605MM to $20.2B (+7%) in 2004, $675MM to $21.9 (+8%) in 2005, and $905MM to $22.8B (+4%) in 2006. L-T sales growth rate downticked by one percentage point to 3%. We maintain our Market Perform rating.

Chattem (CHTT / Nasdaq)
Bank of America Montgomery
Chattem reported fiscal third quarter EPS of $0.65, up 56% over last year, in line with guidance provided earlier this month. We had estimated third quarter EPS of $0.64. We are raising our price target to $45, and maintain our Buy rating.

Colgate-Palmolive Company (CL / NYSE)
Prudential Securities
New products should accelerate 2H unit growth to 5% from 3.5% in the first half. "Regionalization", treating each region as one country for production while maintaining in-country sales and marketing, should also drive gross margin expansion and ROIC growth. Completed in Western Europe where ROIC is now above 40% we think; completed in Central Europe; We maintain our Market Perform rating.

Cadbury Schweppes plc (CSG / NYSE)
NEWS
CSFB, Goldman in Talks With SEC to Settle Probes Into Analysts, People Say Credit Suisse First Boston and Goldman Sachs Group Inc. are in talks with the Securities and Exchange Commission to resolve investigations into whether their stock research was compromised by conflicts of interest, according to people familiar with the situation.

Dell Computer Corporation (DELL / Nasdaq)
Bear Stearns
We maintain our estimates for FY03 at $0.80 (vs. $0.65) on revenue of $35.1 billion up 13% Y/Y, and for FY04 at $0.95 in EPS on revenue of $41.2 billion, up 17% Y/Y. We are forecasting EPS of $0.21 (vs. $0.16) on revenue of $8.96 billion, up 20% Y/Y. We maintain our Outperform rating as we see Dell in a superior position to emerge a winner from the ongoing price war and consolidation and to capitalize from its multiple current and potential drivers of growth.

Extreme Networks Inc (EXTR / Nasdaq)
NEWS
Extreme Networks Has 1st-Quarter Loss, Lower Revenue (Update2) Extreme Networks Inc., a maker of computer-network switches, said it had a loss in the fiscal first quarter instead of an expected profit as revenue fell.

Family Dollar Stores Inc (FDO / NYSE)
Salomon Smith Barney
We estimate for 4Q02 $0.24 per share versus $0.20 last year, reflecting 20% growth. Importantly, although management reaffirmed our estimate in their August sales release, the company noted that a potential charge might materialize in the fourth quarter. We believe that Family Dollar remains the best-positioned dollar store to achieve our earnings expectations over the next 12-18 months. We are Marketweight the Broadlines industry.

Fresh Del Monte Produce (FDP / NYSE)
Piper Jaffray
We are raising our F2002 third quarter estimates for Fresh Del Monte by $0.10 from $0.30 to $0.40 along with F2002 from $2.80 to $2.90. We are also raising full year F2003 estimates from $2.95 to $3.10. The increase is due to strong dollar volume in bananas and favorable foreign exchange rates. We believe that the strong fundamentals could make this forecast conservative.

Fannie Mae (FNM / NYSE)
Lehman Bros
While we are maintaining our 1 rating on the stock of FNM for 12 month purposes, we believe that continued declines in mortgage rates from current levels are a net negative for Fannie Mae's earnings outlook, not a positive. Further declines in short rates would be marginally positive. Our concern is that if this self-perpetuating rally in the 10 year Treasury continues, at some point, with mortgage rates dropping another 30-50 basis points (just an estimate), we might need to eventually trim next year's estimate to reflect a larger decline in mortgage yields than would be the case in cost of funds.

Hilton Hotels Corp. (HLT / NYSE)
NEWS
Hilton's 2003 Profit Forecast Cut to 50c at CSFB, CNBC Says Hilton Hotels Corp.'s 2003 earnings forecast was reduced to 50 cents a share from 68 cents at Credit Suisse First Boston, financial news network CNBC reported

H&R Block (HRB / NYSE)
Morgan Stanley Co.
We slightly raised F2003-04E EPS. We had been concerned that the eventual decline of the Refund Anticipation Loan product would pressure HRB's marging and profit growth. We now believe our model was too pessimistic. Moreover the same trend that hurts RAL business could boost demand for HRB's office based and software services.

Meristar Hospitality Corp (MHX / NYSE)
Bear Stearns
MeriStar pre-announced lower 3Q02 results and provided an update on its expected 4Q dividend. As a result of the weaker RevPAR outlook, MeriStar revised 3Q EBITDA to $38.5 - $39.5 million from $44 - $47 million previously and 3Q FFO to $0.10 - $0.12 per share from $0.20 - $0.25. MeriStar's pre-announcement was not a surprise given the difficult operating environment that has persisted since last September.

Meristar Hospitality Corp (MHX / NYSE)
Warburg Dillon Read
We are lowering our 2002 and 2003 FFO per share estimates by $0.20 each to $1.50 (-12%) and $1.75 (-10%), respectively. We still believe that investors should stay on the sidelines during the next few weeks as we gauge whether business travel will decline sequentially.

QUALCOMM (QCOM / Nasdaq)
Warburg Dillon Read
Revising higher FY02 and FY03 pro forma EPS estimates demand to $0.95 and $1.10 in FY02 and FY03, respectively, to reflect better than expected end-market demand. Maintain Hold rating.

Schering-Plough Corp. (SGP / NYSE)
SG Cowen
Raised sales ests by $70-85MM in 2002-06, largely due to strong Intron franchise trends. Continue to look for big EPS decline in 2003, followed by powerful recovery in 2004-06. Our Q3:02 EPS est of $0.29 (-28%) well below consensus but simply reflects mgt guidance that about $250MM in Claritin pre-tax profits will be de-stocked in Q3. We maintain our Market Perform rating.

Steris Corporation (STE / NYSE)
Piper Jaffray
STERIS has increased EPS estimates for Q2.03 to a new range of $0.24 to $0.26 (growth rate of 85-100%) versus our previous estimate of $0.20. We are raising our revenue estimate for Q2 to $231 million, up from $226 million and for FY03 from $954 million to $959 million. Our new EPS estimate for Q2 is $0.25 and $1.05 for FY03. This increase follows the $0.06 EPS increase to FY03 EPS we made in July.

SunTrust Banks (STI / NYSE)
Bear Stearns
We are maintaining our Underperform rating on SunTrust as we are lowering our estimates to reflect poor equity markets, the expectation of margin compression from continuing low interest rates and SunTrust's decision to expense stock options. We have lowered our price target to $67 from $69.

Walgreen Company (WAG / NYSE)
NEWS
Walgreen's Fourth-Quarter Earnings Rise 14 Percent as Pharmacy Sales Gain. Walgreen Co.'s fourth-quarter earnings rose 14 percent as the largest U.S. drugstore chain added stores and increased pharmacy sales.

Wal-Mart Stores (WMT / NYSE)
NEWS
Wal-Mart Lowers Its Forecast for Sales Increase as Consumers Pare Shopping. Wal-Mart Stores Inc., the world's largest retailer, lowered its September sales forecast to an increase of 3 percent to 4 percent as consumers pare shopping lists to necessities such as food and clothing.

STRATEGY CALLS / MARKET CALLS
Morgan Stanley Co. (Consumer Staples)
1) We believe MO ($38, O) has a far greater understanding of business conditions now than it did in 1993, is responding far sooner to an emerging problem in a more moderate way, and is maintaining list price levels. 2) So long as the MSA is enforced and low-end manufacturers behave rationally, we believe the leading US manufactures, over time, will regain their pricing power.

Merrill Lynch (Tech)
Budgets this year should decline by 2% on average. Fourth Quarter spending should be flat to down y/o/y and somewhat less than normal. Most users said their storage needs are being met, which we would dispute. Leaders in storage are: EMC, IBM, and Veritas.

SALOMON SMITH BARNEY (Data Storage)
IT spending, competitive (potential) competitive pressure, and investor's decision to sell now and ask questions later, continues to hinder the performance of many storage stocks.BRCD stock experienced the brunt of investor's negative sentiment after company management did not comment on guidance and business conditions. EMC, however, was indirectly affected by a separate event. IDC hosted an analysts briefing, during the briefing IDC analysts revealed their current thought process on the storage industry for 2003 through 2006. We assign a Marketweight rating to the Storage Industry.

Warburg Dillon Read (Telecom)
Our analysis of pension and post-retirement benefit accounting at the Bell pure-plays suggests pressure on earnings will increase in 2003. We peg the incremental year-over-year per share impact at $0.21 for Verizon, $0.17 for SBC and $0.05 for BellSouth in 2003. This is despite FAS 142-adjusted core earnings decline estimates of 2.1% at Verizon, 3.8% at SBC, and 11.2% at BellSouth in 2002.

Warburg Dillon Read (Specialty Finance)
Upgrading the mortgage insurers (MGIC, PMI, and Radian) to Strong Buy. Bad news overly discounted? Since MGIC's earnings disappointment announcement a week and a half ago, investors have dramatically lowered the valuationof the mortgage insurers (MIs), and certainly far more than the percentage decline in our EPS estimates. We are therefore raising our ratings on MGIC, PMI and Radian to Strong Buy from Buy and we maintain our Strong Buy rating on Triad.

Bank of America Montgomery (Beverage)
We believe Coca-Cola Enterprises has the best chance to beat numbers driven by strong North American volume and cost savings. PepsiCo is caught between stalled momentum and an attractive valuation. We continue to rate PEP with a Buy rating, despite slight concerns and KO with a Market Perform rating.

Merrill Lynch (Specialty Retail)
We continue to believe that the consumer will be more conservative with spending than we had anticipated and remain cautious about the outlook for the second half.

ECONOMICS
Farm Prices (Sep, 2002)

Personal Income & Outlays(Aug, 2002)

MEETINGS
FedEx Corp Shareholders Meeting

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