Analyst Picks and Pans: BAC, WHR, MAT

Bank of America (BAC)

FBR Capital reiterates underperform, price target

FBR analyst Paul Miller says by using his 12% unemployment rate scenario, he estimates that BofA needs at least $60 billion-$70 billion in capital to maintain tangible common equity (TCE) ratio above 3% at end of 2010. He notes that FBR's stress test somewhat tougher than the government's current stress test with respect to losses, given that the government's stress test assumes 10% unemployment. He said he encourages BofA to convert $27 billion of private

preferreds as soon as possible, as this will boost TCE ratio to roughly 4.3% today, reduce preferred dividend expense, and bring much-needed capital stability.

word or phrase (WHR)

Raymond James downgrades to market perform from outperform

Raymond James analyst Sam Darkatsh cited Whirlpool's stock's "recent and rapid approach" to his $45 price target and 2009 earnings guidance "that suggests operating results well below prior expectations."

Whirlpool maintained its outlook on Apr. 27 for a 2009 profit of $3 to $4 per share, above analysts' expectations for full-year earnings of $2.78 per share. However, Darkatsh said the guidance is helped by about $1 per share in "non-operating items, decreasing earnings quality in our view."

"While we still maintain that the long-term earnings power exceeds $10 per share, we believe that the recent steep rise in the shares, combined with still-deteriorating demand trends, present a more balanced risk-reward ratio at present," he said in an Apr. 28 note.

word or phrase (MAT)

BMO Capital Markets keeps market perform

The favorable ruling for Mattel Inc. in its lawsuit against MGA Entertainment Inc. was widely expected, BMO Capital Markets analyst Gerrick Johnson said on Apr. 28, but the ruling removes one more layer of uncertainty in the $100 million verdict. On Apr. 27, a federal judge upheld the $100 million verdict in the lawsuit over rights to Bratz doll and confirmed the doll is Mattel property.

A temporary federal receiver will take control of the Bratz brand and MGA's assets. Mattel of El Segundo, Calif., and MGA, Van Nuys, Calif., have been battling over who owns Bratz since 2004. A jury last year awarded Mattel the $100 million verdict for copyright infringement and breach of contract. A hearing set for May 18 will determine whether the receivership should be made permanent.

"The impact on Mattel's stock should be minimal, since this ruling was anticipated by most investors and the jury verdict was already known," said Johnson in a note to investors. "Any reaction is likely to be positive, though, as one more layer of uncertainty has been removed." MGA has said it will appeal the ruling, however, so "finality in this portion of the legal action has not yet been achieved, Johnson said.

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