S&P Upgrades Barclays to Buy

Plus: Analyst opinions on Scholastic, IntercontinentalExchange, and more

Barclays (BCS)

Ups to 4 STARS (buy) from 3 STARS (hold)

Analyst: Derek Chambers

Barclays and ABN Amro (ABN) announce that they are in preliminary merger discussions. We believe there is a relatively limited scope for a non-equity component, given current capital ratios, and as a result we have analyzed a potential merger on the basis of an all-share transaction. We think that at a share price much above EUR 30 for ABN Amro, the synergies would have to be exceptionally high to boost our valuation of Barclays. Nevertheless, we believe the market price of Barclays is already discounting such skepticism about value creation. We are keeping our 12-month target price at $65.

Research in Motion (RIMM)

Maintains 2 STARS (sell)

Analyst: K. Leon, CPA

Ahead of February-quarter results, we believe RIMM will post sales of $930 million and EPS of 95 cents, which is 4 cents below the Street's forecast. While we think the company should be able to deliver 40%-50% sales growth in fiscal 2008 (ending February), the product mix between enterprise and consumer BlackBerry devices may narrow margins. Unconfirmed Reuters reports about a potential buyout of Palm (PALM may change the competitive landscape with Motorola (MOT) and Nokia (NOK). With RIMM priced above peers at 29.3 times our fiscal 2008 EPS estimate of $4.55, we would sell the shares.

IntercontinentalExchange (ICE)

Reiterates 3 STARS (hold)

Analyst: J. Willey

The board of CBOT Holdings (BOT) authorizes discussions and information exchange with ICE relating to ICE's unsolicited merger offer. While the board has not changed its recommendation that stockholders vote in favor of the existing merger agreement with the Chicago Mercantile Exchange (CME), we view the opening of dialog with CBOT a positive step for ICE's proposal. With CBOT officially recognizing ICE's offer, which we view as superior on a financial basis, we see an increased likelihood that CME will need to sweeten its bid.

Scholastic (SCHL)

The company reiterates 3 STARS (hold)

Analyst: J. Peters, CFA

Ahead of Scholastic's February-quarter results expected Mar. 22, we continue to forecast a per-share loss of 9 cents vs. a loss of 37 cents. We see revenue growth of about 3% including gains from educational technology products, and from favorable forex comparisons that boost international sales. Although we anticipate a rise in bad debt expense, we see an operating margin loss narrowing about 350 basis points to a negative 0.1%, reflecting our view that Scholastic will realize cost savings from recent restructuring initiatives. Our 12-month target price remains $37, blending relative value and discounted cash-flow analyses.

Claire's Stores (CLE)

Cuts to 3 STARS (hold) from 4 STARS (buy)

Analyst: Michael Souers

Claire's Stores agrees to be acquired by private equity firm Apollo Management LP at $33 per share. We expect the transaction to receive regulatory and shareholder approval, but we are somewhat surprised by the lack of premium in the price. We believe there was a lack of competing bids, and that management's desire to sell contributed to the swift agreement. We are lowering our 12-month price target to $33 from $38, in accordance with the price planned for the transaction.

CF Industries (CF)

Ups to 3 STARS (hold) from 2 STARS (sell)

Analyst: Kevin Kirkeby

Fertilizer prices are up sharply in the past month in anticipation of strong corn plantings and, we believe, less import competition. With natural gas raw material costs remaining relatively stable, we now expect CF Industries to post wider margins. We also are less concerned about additions to global capacity based on our view of strong fertilizer usage over the next two years, with new demand from ethanol plants likely supporting above-average corn prices. We are raising our 2007 EPS estimate by $0.35 to $2.10 and our 12-month target price by $16 to $45.

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