The Zacks Analyst Blog Highlights:Target, International Paper, Resolute Forest Products, Glatfelter and Rexam

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Jan 30, 2014, 09:30 ET

CHICAGO, Jan. 30, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Target Corp. (NYSE:TGT-Free Report), International Paper Company (NYSE:IP-Free Report), Resolute Forest Products Inc. (NYSE:RFP-Free Report), PH Glatfelter Co. (NYSE:GLT-Free Report) and Rexam plc (OTC:REXMY-Free Report).

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Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Wednesday's Analyst Blog:

Target Down to Underperform

On Jan 29, 2014 we downgraded our recommendation onTarget Corp. (NYSE:TGT-Free Report), the operator of general merchandise and food discount stores, to Underperform following the massive security breach and subsequent trimming of the earnings guidance.

Why the Downgrade?

Estimates for Target have been declining ever since the company publicly acknowledged the security breach on Dec 19. The breach took place during the holiday season, from a day before Thanksgiving up to Dec 15.

Following the massive breach and tempered outlook, the Zacks Consensus Estimate for fiscal 2013 has gone down 11.9% to $3.17 per share over the last 60 days. The Zacks Consensus Estimate for fiscal 2014 has also decreased 6.0% to $4.41 per share over the same time frame. With the Zacks Consensus Estimate for both fiscal 2013 and 2014 moving south, the company now has a Zacks #5 Rank (Strong Sell).

Causes of Concern

Target faced its worst security breach when information related to credit and debit card data of approximately 70 million customers were hacked. As a part of the ongoing inquiry, Target disclosed that the data theft included names, mailing and email addresses as well as phone numbers.

Target lowered its fourth-quarter 2013 guidance owing to the massive security breach. It now expects adjusted earnings per share for its U.S. segment in the range of $1.20 to $1.30, compared with the previous projection of $1.50 to $1.60. Further, comparable store sales are expected to decline 2.5% in the fourth quarter as against flat comps forecasted earlier.

Moreover, Target, as per media reports, has been slapped with several lawsuits in the past few days over the security breach, thereby increasing its legal woes. It seems that there could be more trouble for the retailer, going forward.

IP's xpedx to Merge with Unisource

International Paper Company (NYSE:IP-Free Report) recently announced that its distribution business xpedx will merge with a distribution solution company Unisource Worldwide, Inc. to form a new publicly traded company. The merger is expected to close in the middle of 2014.

The transaction will happen in a Reverse Morris Trust structure, which is used when a parent company has a subsidiary that it wants to sell in a tax-efficient manner. International Paper will receive $400 million in cash and contribute the assets of xpedx to a newly formed wholly-owned subsidiary called xpedx Holding Company. The subsidiary will be spun off into a new company. Following the spin off, UWW Holdings, the parent company of Unisource Worldwide, will merge with xpedx Holding Company. International Paper will own 51% of the new company and UWW Holdings will own the remaining stake.

The newly formed publicly traded company is expected to create an enhanced platform for profitable growth across packaging, print and facility solutions. Post-merger, the new company is expected to have annual revenue in the range of $9 billion to $10 billion and generate approximately $200 million in synergies. The new company is likely to accelerate and enhance top-line growth opportunities and provide customers with innovative solutions in product packaging, paper and print management, supply chain and logistics services and facility solutions

International Paper's strategic move reflects its intention to create a new company with adequate financial stability while focusing its core businesses and increasing its liquidity. Together, the combined company will be well positioned to provide products and services as well as support its customers' businesses.

Headquartered in Memphis, Tennessee, International Paper is a global paper and packaging company with operations in North America, Europe, Latin America, Russia, Asia, and North Africa.

International Paper currently has a Zacks Rank #4 (Sell). Other stocks that look promising and are worth considering in the industry include Resolute Forest Products Inc. (NYSE:RFP-Free Report), carrying a Zacks Rank #1 (Strong Buy), andPH Glatfelter Co. (NYSE:GLT-Free Report) and Rexam plc (OTC:REXMY-Free Report), both carrying a Zacks Rank #2 (Buy).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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