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Good morning. Here’s your daily equity research round up from the Street.Bank of America:
The Southern Company (SO): BAML has downgraded The Southern Company from Buy to Neutral, primarily due to a premium valuation, which the bank sees as stretched even as investors pivot to defensive stocks. SO trades at an 18x forward P/E, one of the highest in the S&P 500.
Walgreen Co. (WAG): Walgreens is swinging for the fences with its Alliance Boots deal, which will change it from an American drug store chain to an international player. However, CS is cautious given the expense and risk of the deal, and recommends that investors avoid the stock. Price target is lowered from $31 to $28.
FedEx Corp. (FDX): The market shook off weak 2013 guidance from the company on the assumption that the outlook will improve after restructuring actions later this year. Jefferies is a bit more cautious, saying restructuring won’t occur until October and will take time to implement. They’d like to see a lower valuation, and lower their price target to $103 from $105.
Discover Financial Services (VF): Discover is delivering a 20 per cent return on equity, which Morgan Stanley expects to continue through next year. That should allow them to make the case for increased leverage, pushing ROE higher and justifying a higher price target. PT is raised from $36 to $39.