Bank of America Merrill Lynch Upgrading Sara Lee Corporation

Bank of America Merrill Lynch is out with a research report on Sara Lee Corporation

and is upgrading shares to Buy with a $21 price target. In a note to clients, Bank of America Merrill Lynch writes, "SLE is making considerable progress towards its goal to split the company by the middle of 2012. Three principal value drivers post the split are: 1) Coffee turnaround - SLE's coffee brands are under-marketed and have upside potential in sales (currently growing on average 200bps slower than market in Europe) and operating margins (currently 350bps below peak levels). The coffee industry does reward strong brands and product concepts, SLE is in a position to tap into this; 2) Cost Saves- $180-$200 million of incremental cost savings are expected to be realized within 3 years equating to more than 20% of pro-forma EBIT; 3) Input costs- could be a tailwind if coffee and meat prices moderate from historic highs in FY12." Shares of SLE gained 3 cents yesterday to close at $17.98.