In addition, HSBC's dividend offers an above-average yield of 6.1%, which partly compensates for the company's below-average estimated five-year growth rate. We believe the stock is fairly valued at present and see limited near-term upside. Our $80 target price represents roughly a 10X P/E based upon our $7.50 earnings estimate for 2009.

AIR Overleveraged and Sinking

AAR Corp (AIR) provides goods & services to commercial airlines and the defense establishment. On the commercial side, demand for he Wood Dale, Illinois-based company's product offerings moves with the size of the fleet -- which is declining -- while requirements for its services may grow as the airlines outsource more maintenance, repair and overhaul work.

For defense, AIR designs and manufactures mobility products, aircraft internal cargo loading/unloading systems and composite structures. AIR has leveraged its balance sheet to support its commercial aircraft leasing activities, which, at this point, is not considered a positive.

Consequently, Zacks opinion has been lowered to Sell and our target price has been adjusted to reflect the current market environment. The average P/E for the Aerospace/Defense suppliers group is 7.23. Using this metric and our F/Y 2009 estimate for AIR of $1.91 engenders a price of $13.81.

Centennial Down to Fair Value

We maintain our Hold rating for Centennial Communications Corp. (CYCL), a regional provider of wireless and integrated communications, based on the company's recent operational performance driven by stronger than expected revenue and earnings, along with sustainable subscriber growth.

New initiatives in fiscal 2009, including network infrastructure upgrades in the U.S. and new unlimited tariff plans in Puerto Rico, are expected to accelerate overall business performance.

However, we remain concerned with competitive factors in CYCL's coverage markets that may challenge customer retention and pricing structure and higher churn rates in some operating regions. Moreover, the company's high net debt level of approximately $1.9 billion and limited cash on its balance sheet remain issues to consider.

Centennial is trading at a P/E multiple of 12.8x, which represents a discount to the telecom-wireless industry group. On the basis of enterprise value (defined as market cap plus debt minus cash) to EBITDA, the stock is trading at a premium to the peer group average. We set a six-month price target of $4.00, based on approximately 5.6x EV/EBITDA for fiscal 2009.

Carmike Cinema Screened a Sell

Carmike Cinemas, Inc. (CKEC) faces a difficult operating environment, along with its own financial challenges. Although the company has had success with recent ticket price increases, the gains have not been sufficient to offset declining attendance. We do not expect material share price appreciation from current levels and are initiating coverage on shares with a Sell rating.

The Columbus, Georgia-based company's current balance sheet leaves it with little financial flexibility. The overwhelming majority of the company enterprise value is comprised of debt, and the management recently suspended the quarterly dividend to focus on reducing leverage. While we believe that this was a wise strategic move, the management must be diligent in ensuring that the company does not violate any existing debt covenants going forward.

In light of the negative economic outlook, we believe that the company has a limited margin for error in executing its operating strategy. Further, we currently project that Carmike will post declines in both EBITDA and Theatre Level Cash Flow in 2008, while once again generating net losses.

Our price target of $3 equates to an EBITDA multiple of approximately 6.5x our 2008 EBITDA estimate and approximately 5x our estimated 2008 Theatre Level Cash Flow. While these multiples represent discounts to Carmike's larger peers, we believe it is appropriate, given the company's business strategy and financial position.

Washington Post Feels the Times

More than one-third of The Washington Post's (WPO) revenue comes from businesses in secular decline -- newpapers and broadcasting. As readers migrate to the Internet and TV viewers seek other forms of entertainment (e.g. cable, DVDs, video games and Internet), ad dollars for WPO shrink.

The battered economy and conseqent weak ad spending are exacerbating the deterioration with no visibility to improvement. WPO's education division (products and services provided through the company's wholly owned subsidiary Kaplan, Inc.) and cable divisions (through its subsidiary Cable One) -- 49% and 15% of revenue, respectively -- are two bright spots, well positioned to continue generating double-digit operating income.

Nevertheless, the stock is trading at 14.3x 2009E EPS, a substantial premium to our estimate of its 5-year growth rate, while it pays a low dividend at a time of high uncertainty. Given the tight credit markets, the company could face a liquidity squeeze when the bulk of its $499.0 million in debt comes due in February 2009.

Robert Half Hold Rec Maintained

Robert Half International (RHI) is one of the world's largest providers of temporary staffing, project professionals and permanent placement services to the finance and accounting industries. Robert Half International provides specialized staffing and risk consulting services worldwide through Accountemps (temporary staffing), high-end administrative staffing, senior-level accounting and finance project professionals, IT consultants and full-time professionals, permanent placement and risk consulting and internal audit services.

Although the company benefited from double-digit revenue growth in 2007, concerns remain about an economic slowdown negatively impacting staffing companies like Robert Half. The operating margin is contracting, primarily due to weak operations at Protiviti (risk consulting and internal audit services), which embarked on an aggressive global staff expansion program at the same time revenues came under pressure from reduced client demand for compliance-related employees.

The Hold rating is maintained. Over the last five years, the company's stock traded in a P/S (price-to-sales) range of 1.05 to 2.62, with the stock dropping to 0.67 times net service revenues in the last few months. Although the company has generated strong revenue and earnings growth in 2006 and 2007, a potential cyclical peak for the company's U.S. businesses remains the primary concern.

Avis Budget (CAR) Stop and Go

The near-term outlook for the Avis Budget Group (CAR) is difficult to ascertain. The truck rental business is experiencing pricing pressure and the economy is weakening. Revenue enhancement and cost-cutting initiatives have been implemented that should fuel significant financial improvements.

However, earnings visibility is limited, especially with a deteriorating economy. Also, historical valuation data is unavailable for Avis Budget Group. Management has lowered guidance for 2008 in view of rising fuel costs, weaker-than-expected enplanements, and lower commercial travel volumes.

The Hold rating is maintained for Avis Budget Group. The target is $4.75 is based on a 5.2 P/E multiple on trailing 12-month EPS, which is approximately where a 5% cyclical growth company (with an average levered balance sheet, but exposed to the risk of falling residual values of its rental fleet) should be valued as the U.S. economy appears to be entering a recession.

State Auto Kept in Neutral

Headquartered in Columbus, Ohio, State Auto Financial Corporation (STFC) is a property & casualty insurance holding company formed in June 1991 by State Automobile Mutual Insurance Company (Mutual), an Ohio mutual P&C company. Founded in 1921, Mutual currently owns approximately two-thirds of STFC.

STFC is expected to release its 3Q08 results on October 23, 2008. The company reported operating losses of $0.12 per share in 2Q08, versus operating net income of $0.51 per share in the prior year quarter, driven by a record level of catastrophe losses of $76.8 million.

Nevertheless, the company is progressing, with net written premiums reporting an increase of 12.4% year-over-year. Standard Auto, the largest line of business, is also growing with good levels of new business applications and steady retentions.

While pricing technology, product development, agency automation and business support have aided the organic growth of the company, growth trends continue to be under attack from intensifying competition, in addition to upward pressure on the company's loss ratios. Therefore, our Hold rating remains in place.