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The Zacks Analyst Blog Highlights: JPMorgan Chase, Citigroup, Morgan Stanley, Goldman Sachs Group and American Public Education



The Zacks Analyst Blog Highlights: JPMorgan Chase, Citigroup, Morgan Stanley,
              Goldman Sachs Group and American Public Education

PR Newswire

CHICAGO, May 2, 2013

CHICAGO, May 2, 2013 /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 JPMorgan Chase & Co. (NYSE:JPM),
Citigroup, Inc. (NYSE:C), Morgan Stanley (NYSE:MS), The Goldman Sachs Group,
Inc. (NYSE:GS) and American Public Education, Inc. (Nasdaq:APEI).

(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)

Get the most recent insight from Zacks Equity Research with the free Profit
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Here are highlights from Wednesday's Analyst Blog:

Legal Tussle for JPMorgan & Citi

Washington Mutual Inc. – acquired by JPMorgan Chase & Co. (NYSE:JPM) in 2008 –
and Citigroup, Inc. (NYSE:C) are encountering legal charges in connection with
issues arising out of the sale of mortgage-backed securities (MBS). Integer
Program LLC sued these two firms for incurring huge losses from mortgage
loans.

Integer has accused Washington Mutual and Citi of breaching an agreement
related to mortgage loan purchase entered by these two institutions in 2007.
As a result of this agreement, Integer incurred a total loss exceeding $301
million.

As per the lawsuit filed by Integer, residential mortgage loans, in excess of
4600, were securitized by Washington Mutual. Consequently, these
mortgage-backed securities were sold to Integer. Of these, the alleged
breaches took place on over 1,400 loans.

Prior to the closing of the offer date of the certificates to the public, more
than 60 mortgage loans were delinquent. Further, it is alleged that both
JPMorgan and Citi were well aware of the associated risks. However, despite
being acquainted with the existing breaches in the securities, JPMorgan and
Citi did not take any steps to rectify them.

Similar Charges Earlier

Earlier in 2013, JPMorgan was sued by National Credit Union Administration
(NCUA), the U.S. regulator for credit unions, for misrepresentation in the
underwriting and sale of MBS worth over $2.2 billion, which were sold to the
U.S. Central, Western Corporate and Southwest Corporate federal credit unions
(FCUs) by Washington Mutual.

Further, many other global giants, including Morgan Stanley (NYSE:MS) and The
Goldman Sachs Group, Inc. (NYSE:GS), are battling similar lawsuits related to
MBS.

Our Viewpoint

Such charges are expected to result in increased legal risks, which might pose
a threat to the companies' financials going forward. Moreover, it is
apprehended that litigation overhangs might tarnish the image of these banking
majors.

JPMorgan currently carries a Zacks Rank #2 (Buy), while Citi carries a Zacks
Rank #3 (Hold).

APEI Downgraded to Neutral

We recently reverted back to a Neutral recommendation on American Public
Education, Inc. (Nasdaq:APEI) from Outperform due to weak new student starts
in the fourth quarter of 2012. American Public Education carries a Zacks Rank
#3 (Hold).

Why the Downgrade?

Even though, American Public beat the Zacks Consensus Estimate for revenues
and earnings in the fourth quarter of 2012, its new student starts were weak
and operating margins declined in the quarter. American Public, an online
provider of higher education, released its fourth quarter of 2012 earnings
results on Feb 28.

New student enrollments declined 8% in the quarter, higher than management's
expectations of a 3% to 7% decline. Management believes that the company's
fraud prevention initiatives are reducing enrollment of students who abuse
funds, which explains the decline in new student starts for the quarter.

Moreover, the company also provided a bleak outlook for student starts in the
upcoming quarter. We believe the declining trend of new student starts could
eventually impact total enrollment in future quarters.

Operating margins also declined in the quarter by around 130 basis points to
25% due to the company's increased marketing efforts, which resulted in higher
selling and promotional expenses.

A tough regulatory environment also remains a persistent overhang.

Despite the fourth-quarter beat, estimates have mostly moved downwards for
2013 and 2014.  The Zacks Consensus Estimate for 2013 moved down by 1.9% to
$2.58 and 7.0% to $2.80 for 2014 over the last 60 days.

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