Goldman Sachs lowered its investment rating on shares of Capital One (COF ) to market perform from outperform. The firm also downgraded AmeriCredit (ACF ) to market underperform from market perform; and removed Household International (HI ) from its recommended list. Goldman now rates Household market outperform.
Analyst Robert Hottensen says the downgrades reflect a weaker economic backdrop and a more pessimistic intermediate-term outlook on credit, housing, and growth. For Capital One, Hottensen sees earnings per share of $3.75 for 2002; he cut his $4.40 forecast for 2003 to $4.25. For AmeriCredit, the analyst sees EPS of $0.60 for fiscal 2003 (ending June) and of $1.19 for fiscal 2004. Hottensen cut his $4.45 2002 EPS estimate for Household to $4.38 and his $4.95 2003 forecast to $4.00.
Hottensen still recommends American Express (AXP ), MBNA (KRB ), Ambac Financial (ABK ), and CIT Group (CIT ), stressing the importance of financial strength, market access, industry leadership, and better competitive positioning as the slowdown intensifies credit quality trends and liquidity issues.