MORGAN KEEGAN MAINTAINS MARKET PERFORM ON WACHOVIA
Morgan Keegan analyst Robert Patten says he views Wachovia's (WB) news that it's removing CEO Ken Thompson as a sign more bad news will be forthcoming when the company posts second quarter earnings.
Patten notes that WB shares have stumbled as losses tied to its ill-timed purchase (2006) of Golden West Financial (GDW) jumped over the last few quarters, pushing EPS lower and forcing WB to do multiple capital raises. He wouldn't be surprised to see more changes among the top ranks at WB over the coming months.
He places estimates under review (biased downward), as he expects losses related to WB's GDW Option-ARM portfolio (25% of loans) to rise significantly over the next few quarters given the continued drop in housing prices and rising foreclosures.
RBC CAPITAL DOWNGRADES CANADIAN PACIFIC RAILWAY TO SECTOR PERFORM FROM OUTPERFORM
RBC Capital analyst Walter Spracklin says he expects shares of Canadian Pacific Railway (CP) will come under pressure in the near term based on: 1) his view that the company will report second quarter results well below consensus estimates, and 2) shares offer limited upside.
He lowers his $1.19 second quarter EPS estimate to $1.05 as a result of significant rise in fuel costs, persistently weak volumes. He notes the company's carload volumes are trending down 1.1% vs. his estimate of 2.5% growth. Moreover, he says a lag in fuel cost recovery from surcharges associated with rapid rise in WTI crude oil is also expected to negatively impact the second quarter.
While his long-term thesis on the rail group in general remains intact, shares of CP are trading in line with his new 73 (down from 74) price target.