From Standard & Poor's Equity ResearchSANDLER O'NEILL UPGRADES SOVEREIGN BANCORP TO HOLD
Sandler O'Neill analyst Joseph Fenech says he considers the reuniting of Paul Perrault -- said to be named CEO of Sovereign Bancorp (SOV) today -- and current CFO Kirk Walters as a strong positive; he notes Walters worked under Perrault in the past.
But Fenech upgrades the stock as it was down 72% yesterday and 81% since mid-February. With the recent stock decline, he thinks the risk/reward tradeoff no longer favors selling the stock at current level.
He reiterates that the upgrade shouldn't be interpreted as an indication that he thinks SOV's fundamental prospects have improved, nor is it related to the proposed management change. He notes SOV investors now also face the risk that Banco Santander (STD) could move sooner rather than later in acquiring remaining 75% of SOV that it doesn't already own.
BAIRD UPGRADES WELLS FARGO TO NEUTRAL FROM UNDERPERFORM
Baird analyst David George says Wells Fargo (WFC) clearly has credit risks, namely its home equity portfolio, but thinks these risks are known and the company will benefit from a flight to quality given its top-tier credit rating, healthy capital position, and willingness to lend in the face of the most difficult credit crisis in decades.
George believes that the challenges in credit markets and weak capital positions of competitors will continue to result in significant new business opportunities for the company, which will likely continue to drive its best-in-class revenue trends among larger banks.
He believes WFC has more than adequate capital to weather the current downturn and its credit rating should enable it to raise capital. He has a $35 price target on the stock.
CALYON DOWNGRADES RELIANT ENERGY TO NEUTRAL FROM ADD
Calyon analyst Gordon Howald says Reliant Energy (RRI) yesterday announced several major financing initiatives designed to shore up its finances and enhance liquidity given the credit turmoil facing the country. RRI also attempted to quantify the impact of Hurricane Ike on its Texas Retail business, and the impact of lower commodity pricing on its Wholesale IPP business.
Howald cuts his already Street-low EPS estimates: for 2008 to $0.23 loss from $0.64 EPS, 2009 EPS to $0.38 from $1.06, and 2010 EPS to $0.38 from $1.12. He drops his $22 stock price target to $10.
He says earnings visibility is poor at this point, and he may adjust his model further depending on what he learns on RRI's conference call this morning.