Analyst Actions: General Motors, Burger King
GENERAL MOTORS CORP.
JPMorgan downgrades to underperform from neutral
Analyst Christopher Ceraso says he is cutting his $2 price target on General Motors (GM) to $1. He notes that over the next two months, as bondholders, union, and GM management meet to hammer out concessions, he thinks it will become increasingly clear that enormous sacrifice of value on part of union (upwards of $10 billion), bondholders (about $24 billion), will require complete or near-complete elimination of existing GM equity. He also notes that the federal government will claim up to 20% of equity value in exchange for $13.4 billion in loans (which will likely turn into a bigger number come February or March).
BURGER KING HOLDINGS
UBS Financial upgrades to buy from neutral
Analyst David Palmer says Burger King (BKC) has a compelling set of initiatives starting in calendar 2009 that should help drive same-store sales and EPS growth. He notes key short-term drivers include: a strong marketing calendar; new menu innovations (Burger Shots and other Batch Broiler enabled menu offerings); and a new combo meal pricing strategy. Palmer adds that Burger King has also traded down over 30% from its August high, underperforming its fast food peers. He raised his $1.50 fiscal 2009 (Sept.) EPS estimate to $1.53, and his $1.73 fiscal 2010 forecast to $1.80; he also hiked his $22 price target to $25.
TEEKAY TANKERS, GENERAL MARITIME, NORDIC AMERICAN TANKER
JPMorgan cuts ratings
Analyst Jonathan Chappell cut Teekay Tankers (TNK) to neutral from overweight as he believes dividend distributions should begin to decline after the 2008 fourth quarter given expected volatility in Teekay’s EPS and cash flow resulting from its above-group-average spot market exposure, and his bearish outlook for tanker spot rates next year. Chappell has a $12 December, 2009, price target for Teekay. He also cut General Maritime (GMR) to neutral from overweight after outperformance of the shares since late October; he has an $11 price target. The analyst also cut Nordic American (NAT) to underweight from neutral; he has a $19 price target.