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Morgan Stanley Cuts Ratings of Three Megadealers

November 11, 2002

Morgan Stanley cut its investment ratings Nov. 11 on auto retailers AutoNation Inc. and UnitedAuto Group Inc. to "underweight" from "equal-weight," and reduced Lithia Motors Inc. to "underweight" from "overweight," according to a Reuters report.

Analyst Vinay Shah, in a research note, cited concerns about the new-vehicle market and margins, according to Reuters.

Shah also cut the 2003 earnings estimate for UnitedAuto Group to $1.95 a share from $2.02. The analyst estimated that the stock might fall as low as $9 to $11 a share, Reuters said.

His estimates for both AutoNation and Lithia Motors, already below consensus and management guidance, were not changed. Shah estimated AutoNation's stock might fall as low as $8 to $9 a share, while Lithia Motors might decline to $14 to $15 a share, according to Reuters.

AutoNation shares closed Friday at $10.20, Lithia closed at $16.95, and UnitedAuto closed at $12.30, all on the New York Stock Exchange. All are near their 52-week lows, Reuters said.

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