From Standard & Poor's Equity ResearchGOLDMAN REMAINS CAUTIOUS ON REGIONAL BANKS
Goldman Sachs analyst Richard Ramsden says he indentified four factors to spur turnaround for U.S. banks, which may still be six to nine months out. First, he believes home prices will keep falling through yearend and he doesn't see a peak in losses until 2009; to reflect this, he lowers EPS estimates.
Second, he thinks capital raising becomes harder. Third, consensus revisions are a lagging indicator; when the range tightens, it will signal confidence in where book values stabilize. Last, a steeper yield curve has helped, although even here this has recently reversed in part amid Fed tightening risk.
Zions Bancorporation (ZION), (STI) and Huntington Bancshares (HBAN) are among the bank stocks he cut estimates and price targets on to reflect higher net charge-offs and loan loss provision.
CITIGROUP UPGRADES CME GROUP TO BUY FROM HOLD
Citigroup analyst Donald Fandetti says he's upgrading CME Group (CME) stock because the risk/reward is now much more compelling and several negative catalysts are receding for CME. He notes, as of Monday's close, CME was down about 40% year-to-date and was trading at a 2.5-year low.
Fandetti says he formerly had a negative near-term trading call on CME due to concerns about downward estimate revisions and slower volumes. But volumes have begun to pick up and estimates are now more rational.
He views CME's planned acquisition of NYMEX Holdings (NMX), which the Dept. of Justice cleared late yesterday, as a win-win situation. Also sees CME riding the tailwind of a potential recovery in financial stocks. He has a 485 target price on CME.
LONGBOW UPGRADES WORTHINGTON INDUSTRIES TO BUY FROM NEUTRAL
Longbow analyst Bob Richards tells S&P MarketScope he's raising his fourth quarter of fiscal year 2008 (May) EPS estimate by $0.06 to $0.54 and fiscal year 2009 EPS by $0.11 to $1.75, due mostly to stronger steel pricing. He says with Worthington Industries' (WOR) Metal Processing segment's operating margins nearly 80% correlated with hot band costs, it's reasonable to expect meaningful appreciation in this segment's contribution going forward.
Richards says he's also encouraged by turnaround efforts in WOR's Metal Framing business and expects it to be profitable in the fourth quarter of fiscal year 2008 and in fiscal year 2009.
He also cites WOR's "generous annual dividend of $0.68/share," and says he sees favorable risk-reward for the stock going forward, given recent price levels. He has a 25 price target on the stock.