GOLDMAN SACHS CUTS ESTIMATES FOR CITIGROUP
Goldman Sachs analyst William Tamnona says the market is likely to view Citigroup's (C) change in management in a positive light, although the size of write-downs will offset some of that enthusiasm. He says, while additional write-downs are not surprising to him given the firm's exposure to subprime, he's surprised at the timing of the announcement as Citigroup only reported third quarter earnings a few weeks ago (notes it only took a $1.6 billion write-down on the portfolio).
Despite such a large write-down, Tamnona says he wouldn't be surprised if additional write-downs were forthcoming as the market has deteriorated meaningfully since the quarter ended. He cuts his $3.85 2007 EPS estimate to $2.22, $5.10 for 2008 to $4.65, and $5.65 for 2009 to $5.20. He cuts his $51 price target to $48. He has a neutral rating on the stock.
BEAR STEARNS DOWNGRADES PETROCHINA TO UNDERPERFORM FROM PEER PERFROM
Bear Stearns analyst Adam Clarke downgrades PetroChina (PTR) based on valuation. He notes at Friday's close, PetroChina ADRs were at $255.06, compared to his new yearend 2008 fair value and yearend target price of $166.97 (up from $164.52).
He says that in response to Chinese government's recent adjustment of diesel, gasoline, and jet fuel prices and the cash received from the A-share issuance, he raises 2007 and 2008 EPS estimates by 2.1% and 13%, respectively. But with the A-share issuance in Shanghai complete and with oil trading at record levels, he sees little fundamental reason why PetroChina should outperform other Chinese oil companies or even the China market.
STIFEL UPS WELLCARE HEALTH PLANS TO HOLD FROM SELL
Analyst Thomas Carroll says the upgrade of WellCare Health Plans (WCG) is based on his belief that a sell rating is no longer appropriate given its current valuation. He notes, however, that investors should be extremely cautious, as he believes the news flow should be unpredictable in timing and unfavorable in content.
Carroll says key the conclusion from his liquidation analysis is that even with large discounts on revenue that are most likely too harsh, WCG shares can be valued higher than where they are currently. He keeps $5.10 2007 EPS estimate, lowers $5.10 2008 to $5.00; notes sensitivity around his new 2008 EPS estimate provides range of $4.50-$5.50, implies a value of $45-$55 for stock based on a 10x multiple.