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S&P Picks and Pans: BofA, Forest Labs, American Express


Analyst opinions on stocks making headlines in Tuesday's market

From Standard & Poor's Equity Research12/23/2008- 3:04pm S&P REITERATES DOWNGRADE EARLIER TODAY ON SHARES OF BANK OF AMERICA TO SELL (BAC)

Prior opinion was Hold. We also lower EPS estimates to reflect our higher projection of securities writedown and loss provisions. Based on widening spreads in secondary market, particularly for commercial real estate, we look for Q4 writedowns to be up from Q3. In addition, we think BAC will continue to add to reserves well above chargeoff levels because of worsening of credit conditions. All told, we are reducing our ‘08 and ‘09 EPS estimates by $0.14 and $0.48, respectively, to $1.33 and $1.87. Our target price, cut earlier from $17, is $10, in line with tangible book value. /S. Plesser

12/23/2008- 2:48pm S&P RAISES RECOMMENDATION ON SHARES OF FOREST LABORATORIES TO BUY FROM HOLD (FRX)

FRX licenses Phase II drug F2695 from French drugmaker Pierre Fabre Medicament for $75M plus contingent milestones. F2695 belongs to the new SNRI class of antidepressants (Serotonin and Norepinephrine Reuptake Inhibitors). We also expect near-term FDA action on FRX's submission for milnacipran, a SNRI treatment for fibromyalgia. We believe these and other new drugs should help offset patent expiration losses on Lexapro and Namenda in 2012. We raise our target price by $2 to $30, applying a modestly below-peers 9.1X to our FY 09 (Mar.) EPS estimate of $3.28, lowered by $0.07. /H. Saftlas

12/23/2008- 2:45pm S&P MAINTAINS HOLD OPINION ON SHARES OF AMERICAN EXPRESS (AXP)

AXP announces it received preliminary approval to participate in the Treasury's Troubled Asset Relief program (TARP). It expects to sell to the Treasury $3.39 billion of preferred stock with a 5% yield, along with warrants to purchase common stock. We are encouraged by this development. With the securitization market likely to remain frozen, funding issues are a concern. AXP has recently stepped up deposit collections, and we think it should have enough liquidity to fund its operation. However, rising charge-offs are a concern. We keep our target price of $20. /S. Plesser


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