From Standard & Poor's Equity ResearchOPPENHEIMER CUTS ESTIMATES ON U.S. BANKS
Oppenheimer analyst Meredith Whitney says she's cutting first quarter estimates for U.S. banks on average by 84% (led by Citigroup (C) at -309%), 2008 estimates by 30% (led by Citigroup at -120%), to reflect first quarter 2008 mortgage and CDO related writedowns. She notes that since November, she's cut estimates for financials over 30 times, with no clear end in sight.
Whitney says she's now, on average, 47% below consensus for the first quarter and 34% below for 2008. She expects consensus estimates to trend lower as we approach earnings in mid-April. She notes as key mark-to-market indices trend lower, the housing market worsens and the U.S. consumer comes under increasing pressure, she sees further downside to estimates and stock prices.
For Citigroup, she widens $0.28 first quarter loss estimate to $1.15 loss, $0.75 '08 EPS to $0.15 loss. She also cut her forecasts for Bank of America (BAC), Wachovia (WB) and JPMorgan Chase (JPM).
JPMORGAN CUTS JABIL CIRCUIT TO UNDERWEIGHT FROM OVERWEIGHT
JPMorgan analyst Mark Moskowitz says Jabil Circuit's (JBL) second quarter was solid, but the company cut its fiscal year 2008 (August) outlook, which following similar disappointment in December, 2007, underscores ongoing effects of broader macro morass. He notes his downgrade suggests JBL lacks sustainable appreciation potential, relative to other stocks under his coverage, owing to its tenuous revenue and margin profiles.
Moskowitz says it's increasingly apparent JBL cannot overcome macro-driven weakness across most of its end markets in the near- to mid-term. He says it's important to note he thinks JBL's challenges are more a reflection of its end market exposure than any company-specific factors.
He cuts $1.19 fiscal year 2008 EPS estimate to $0.76, and $1.63 for fiscal year 2009 to $1.05.
JP MORGAN DOWNGRADES GENESIS LEASE, AIR CASTLE
JPMorgan analyst Jamie Baker says he downgrades Genesis Lease Ltd. (GLS) and Aircastle Ltd. (AYR) to neutral from overweight to reflect credit and equity market challenges coupled with the firms' collective business model, which he considers to be less optimized in a market where aircraft values may soften. He specifically notes he didn't consider underweight ratings for either, given that estimated market values of their fleets are estimated to be 5%-6% above reported NAV (net of depreciation).
While he doesn't believe risk to a dividend cut at GLS is particularly high (AYR cut its dividend yesterday), given a lack of new order book and associated capital requirements, he thinks investors will slowly gravitate away from their pursuit of income, potentially limiting upside in GLS shares.