JP Morgan Cuts LandAmerica Rating
JP Morgan cut its investment recommendation on LandAmerica Financial Group (LFG ) to underweight from neutral, citing the company's announcement of a $35 million non-cash write down.
Analyst George Sacco believes the goodwill impairment charge will raise concern that there may be future charges. He also believes the fundamentals in the company's core title operations are likely to decline beginning in the fourth quarter. He noted that the $1.42 third quarter goodwill impairment charge relates to the company's Lereta tax and flood operation, which reinforces his view that LandAmerica has a questionable track record with acquisitions. He thinks its fundamentals are likely to deteriorate beyond the third quarter as its revenues are highly sensitive to mortgage volume, and he sees seasonal slowdown in the fourth quarter that is likely to continue into 2006.