Markets & Finance

Analyst Actions: Smurfit-Stone, Temple-Inland, Kindred Healthcare


From Standard & Poor's Equity ResearchCREDIT SUISSE UPGRADES SMURFIT-STONE, TEMPLE-INLAND

Credit Suisse analyst Mark Connelly says he's raising his sector weighting for paper and forest products to overweight from underweight. He says stock prices have corrected since January 2007, and in many cases now reflect appropriately weak expectations. As such, he upgrades Smurfit-Stone Container (SSCC) and Temple-Inland (TIN) to outperform from neutral, citing a more attractive risk/reward balance.

Regarding the sector, Connelly thinks several paper grades will see further declines in demand, but fundamentals in most grades should bottom out this fall. Among the grades, he says uncoated free-sheet has been most resilient in the face of falling demand, and Domtar (UFS) remains the best positioned stock in that group despite a lack of near-term catalyst.

FRIEDMAN BILLINGS UPGRADES KINDRED HEALTHCARE TO OUTPERFORM FROM MARKET PERFORM

Friedman Billings analyst James Kumpel says Kindred Healthcare (KND) has made it through to the end of the tunnel with the lifting of reimbursement pressures, landlord tensions, and restructuring challenges.

Kumpel believes the company's operating leverage will work in its favor in the second half of 2008 and 2009, given very conservative malpractice expense assumptions, improving productivity in contract rehab business, and improving quality mix in skilled nursing facilities. He believes the company is well positioned to beat modest expectations over the rest of the year, and that 2009 EPS views may well increase as 2008 results demonstrate earnings power of all three business units performing well simultaneously.

He raises 29 price target to 36, which is 8 times his 2009 EBITDAR estimate.


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