From Standard & Poor's Equity ResearchFBR CAPITAL CUTS ESTIMATES, TARGET ON WELLS FARGO
FBR Capital analyst Paul Miller says based on Wells Fargo's (WFC) peer results, largely reflecting greater credit costs, he cuts $0.35 fourth quarter operating EPS estimate to $0.30, $1.50 2009 to $1.10, and $2.50 2010 to $2.15.
Miller cuts his price target to $12, equal to his fourth quarter 2008 pro forma estimate of tangible book value, including Wachovia. He reiterates underperform opinion on the stock.
Given his expectation for WFC to earn less than its dividend in 2009 and its thin 3.6% pro forma tangible common equity ratio, he believes it will have to cut its dividend. He notes the bank's current dividend reduces tangible common equity $5.65 billion annually, and WFC needs to rebuild its capital ratios.
STIFEL NICOLAUS DOWNGRADES BANK OF AMERICA TO HOLD FROM BUY
On Jan. 16, Bank of America (BAC) said the U.S. government agreed to buy a further $20 billion of company's preferred shares and protect the company against certain losses; BAC also posted a fourth quarter loss.
Stifel Nicolaus analyst Christopher Mutascio says the substantial government ownership in BAC provides uncertainty regarding intervention and political pressures; he cites the sizeable preferred dividend payments.
He notes significant credit quality deterioration, and says the company may have to raise commercial loan-loss reserves.
Mutascio cuts $1.80 2009 EPS estimate to $0.45, $2.65 2010 to $1.30 (excluding any common capital raised to repay Treasury for $49 billion preferred equity in BAC.
DRESDNER CUTS LOGITECH INTERNATIONAL TO ADD FROM BUY
Dresdner analyst Robert Sanders says Logitech International's (LOGI) 29.9% third quarter gross margin was far below expectations. He notes sales fell 16% on the highest-margin categories, instead of on the lowest, as he had expected.
Sanders says it is difficult to foresee a recovery in operating margin in an environment of plunging demand for the company's most profitable categories. He says LOGI could have handled communications better in the quarter; the company's not giving indication on adverse mix shift meant a "drip drip" of bad news. He believes recovering confidence will take time.
He cuts CHF 20 target to CHF 15.