We upgraded MeadWestvaco to Overweight from Neutral, even though we cut earnings esitmates 1% to 2% and cut our price target to $30 from $32. Our upgrade is because MWV’s share price fell by over $7 while our price target fell just $2 per share. There is a chance our 8% discount rate is too harsh, and that MWV’s business mix is a little more stable than some other manufacturers. Our valuation of the timber lands at $1,140 per acre or development land largely in South Carolina at $1,676 per acre also could prove too low. Some Southeastern timber lands have sold for over $1,500 and some development lands for over $10,000 per acre, but current business conditions are less good than several years ago. However, we could derive a price target nearer to $35 to $40 than $30 if we made more aggressive assumptions on the discount rate or land values.

We believe the Tepper vs. Temple-Inland litigation filed earlier this week benefits International Paper, whom we no longer believe will need to sweeten its $30.60 bid to acquire Temple-Inland. We maintained our Overweight rating on IP with a $37 price target, although its $7 in additional potential merger benefits looks bigger and more certain with these developments. We cut our price target for Temple-Inland to $30.60, the bid currently on the table, from $35 while maintaining our Overweight rating for TIN. We modeled a 2013 $0.5 billion litigation loss into our revised Temple-Inland model somewhat conservatively, even though any litigation is uncertain.

Bankruptcy trustee Kenneth Tepper seeks to recover subsequent Guaranty Financial loan losses after the December 2007 spinoff, the failure to apply subsequent Guaranty losses against containerboard profits as a tax shield and pre-spinoff dividends paid in 2006 and 2007.