From Standard & Poor's Equity ResearchSANDLER O'NEILL SAYS BANK OF AMERICA Q2 BETTER THAN EXPECTED; KEEPS HOLD
Sandler O'Neill analyst Jeff Harte says Bank of America's (BAC) Q2 core EPS of $0.73 is better than his $0.43 and the Street's $0.53 estimates. He says it is a solid beat driven by record revenues of $20.32 billion (12% above his view), which was net interest income and Capital Markets centric. He adds that net interest margin expanded 19 basis points quarter-to-quarter.
Net write-downs of $1.2 billion were below his $1.6 billion estimate. Harte says BAC reported its second best investment banking quarter ever, reflecting strength in the firm's core trading business. He sees some indications that the deterioration in BAC's residential mortgage portfolio is not as rapid as indicated by JPMorgan (JPM) last week.
Countrywide details were positive but limited; he expects more disclosure on the conference call. He will update estimates and target after the call.
BB&T CAPITAL UPGRADES TIMKEN TO BUY FROM HOLD
BB&T Capital analyst Holden Lewis tells S&P MarketScope that he upgrades Timken (TKR) on valuation and execution. He believes investors are focused on the U.S. auto industry woes, blinding them to stable conditions in the larger portion of the business (non-auto bearings, steel) and better execution on the myriad margin opportunities available.
Lewis thinks TKR should start to farm investments in IT (Project One), Asian, and aerospace for margins. He sees $2.95 2008 EPS, $3.40 for 2009, and $3.90 for 2010.
He notes that his upgrade is not related to a catalyst, so he hasn't changed his forecasts. However, he sees potential for upside over his forecast horizon based on executing on the margin opportunities at hand. He has a $40 price target on the stock.
PALI RESEARCH DOWNGRADES TIME WARNER CABLE TO SELL FROM NEUTRAL
Pali Research analyst Richard Greenfield says with Time Warner Cable's (TWC) competition ramping (particularly in NYC) and a weakening economy driving people to listen to competing offers more closely, he's cutting his 9.6% 2009 EBITDA growth estimate for TWC to 7.9%, with $1.21 EPS estimate reduced to $1.11.
Based on his checks, Greenfield says TWC does not appear to be well-prepared for Verizon's (VZ) FIOS TV service in NYC.
Adjusting for $10.27 dividend TWC will pay at yearend 2008, he believes TWC trading at effectively 16 times 2009 EPS estimate and 14.5 times 2009 free cash flow. He believes that its valuation is unwarranted, with his target price of $13.50 ($23.77 pre-dividend), based on 12 times 2009 EPS and 11 times 2009 free cash flow estimate.