Analyst Actions: GM, BMC Software, Capital One, Martha Stewart Living
BEAR STEARNS KEEPS UNDERPERFORM ON GENERAL MOTORS
Bear Stearns analyst Peter Nesvold says General Motors (GM) had to take a non-cash valuation allowance against roughly $39 billion of NOLs; it reported a $68.85 loss per share. A few weeks ago, management said it might lose much of its deferred tax asset when the UAW deal went effective because much of the asset was created by retiree healthcare: so if the OPEB liability went away, so would deferred tax asset.
But that's not what appears to be the driver here -- rather, it appears GM's accountants are saying it is more likely than not that GM will not be able to utilize the NOLs due to deteriorating outlook for autos and mortgages, Nesvold says. Fundamental pressures appear to be coming on faster than he thought. He sees downside risk to $30.
CIBC REITERATES SECTOR OUTPERFORM ON BMC SOFTWARE
CIBC analyst Brendan McCabe says BMC Software's (BMC) second quarter results are very strong, and easily beat the consensus, guidance and his estimate. He says highlights include strong revenue and bookings growth, significantly better cash flow generation and operating margin expansion.
McCabe notes that BMC continued its "beat and raise" streak -- lifting revenues, EPS and cash flow guidance for fiscal year 2008 (March). He adds that management was bullish on its Business Service Management prospects with core BSM license growth up 16% year-over-year (6th consecutive quarter of double-digit growth). The mainframe business continues to chug along, despite investor concerns heading into the second quarter.
He raises $1.75 fiscal year 2008 EPS view to $1.86, and $1.94 for fiscal year 2009 to $2.09. He also ups target price to $40 from $38.
KEEFE, BRUYETTE CUTS CAPITAL ONE FINANCIAL TO MARKET PERFORM FROM OUTPERFORM
On Nov. 6, Capital One Financial (COF) raised the top end of its 2008 charge-offs estimate to mid-$5 billion. Keefe Bruyette analyst Robert Hughes notes COF management provided an update to its credit outlook for 2008, suggesting a range of expected losses higher than that provided on its third quarter conference call.
Hughes says it's important to note that the basis for this guidance has changed, and now incorporates the assumption that elevated card delinquencies persist (based on a more recent view of the flow rate of early-stage delinquencies), while also allowing for continued significant degradation in the housing market.
He maintains $5.00 2007 EPS estimate, but cuts $7.50 forecast for 2008 to $6.90. He also lowered his $78 price target to $65.
MORGAN JOSEPH UPGRADES MARTHA STEWART LIVING TO BUY FROM HOLD
Morgan Joseph analyst David Kestenbaum tells S&P MarketScope shares of Martha Stewares Living Omnimedia (MSO) have recently taken a hit as it has been negatively impacted by tightening consumer budgets and unfavorable macro-economic data, which have caused consumer stocks to slide. However, he believes MSO has a number of initiatives in the queue that should help it return to profitability in 2007 and further out, provide a nice platform for growth over the long-term.
Kestenbaum upgrades the stock as a result of current valuations and a nice organic growth development pipeline. Establishes a $16.50 price target.