S&P Picks and Pans: Corning, Bank of America, Playtex, Paychex

Analyst opinions on stocks making headlines Friday

Corning (GLW; $27.00)

Maintains 5 STARS (strong buy)

Analyst: Todd Rosenbluth

We remain positive on Corning as we approach release of its second quarter results in late July. Following encouraging comments from major customer Samsung about demand trends for LCD TVs, combined with our belief that fiber sales to telecom customers will be solid, we are raising our forecasts of Corning results for 2007 and 2008. Aided by revenue growth and gross margin expansion, we are increasing our 2007 EPS estimate by 2 cents to $1.32 and 2008's by 4 cents to $1.54. Based on revised p-e analysis and a higher long-term EPS growth rate, we are increasing our 12-month target price by $3 to $33.

Bank of America (BAC; $49.48)

The company reiterates 5 STARS (strong buy)

Analyst: Frank Braden

A ruling by Dutch Supreme Court allows the purchase of LaSalle Bank by BofA. The court reversed an earlier decision by a lower court that would have required shareholder approval for the sale by LaSalle's owner ABN Amro (ABN). The $21 billion cash deal, with a $5 billion rebate of excess capital to BofA, is expected to be immediately accretive to EPS, and BofA sees $400 million in after-tax cost savings in 2008 and $800 million in 2009. We believe the deal would provide BofA with a strong presence in the attractive Chicago market and we expect the company's experience in similar transactions to aid in its success.

Playtex Products (PYX; $18.01)

Maintains 3 STARS (hold)

Analyst: Loran Braverman, CFA

Playtex agrees to be acquired by Energizer Holdings (ENR), for $18.30 per share in cash, plus the assumption of Playtex debt. We think the price is reasonable. above Playtex's historical high, last seen in 1998, and more than a 20% premium to where Playtex was selling at the start of this week. We have been encouraged by PYX's improving operations, but think more progress can be made as part of Energizer. We are raising our 12-month target price by $3 to $19 to be in line with the price of the proposed acquisition, subject to approvals.

Paychex (PAYX; $41.44)

The company reiterates 3 STARS (hold)

Analyst: Dylan Cathers

Paychex announces its intention to repurchase $1 billion worth of common stock. At the end of fiscal 2007 (May), the company had $79 million in cash and no debt, so the use of debt for the repurchase plan would be a logical one, in our opinion, especially given Paychex's steady free cash flow growth. Until we have a better idea of the timing and pace of buybacks, we are keeping our fiscal 2008 EPS estimate at $1.59. Also, Paychex is raising its quarterly dividend by 43%, to 30 cents from 21 cents. The increase is after last year's 31% increase. We are maintaining our 12-month target price of $43.

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