Stock Picks: Goldman, Lazard, Travelers

Plus Wall Street analyst opinions on Employers Holdings, Navigators Group, and Bill Barrett Corp.

Goldman Sachs (GS)

Standard & Poor's Equity Research keeps buy; raises estimates, price target

S&P Equity analyst Matthew Albrecht said on Oct. 15 that Goldman's third-quarter earnings of $5.25 per share, vs. $1.81 earnings per share one year earlier, beat his $4.01 estimate. Investment banking revenues fell vs. the second quarter, but the firm saw its backlog of deals increase significantly, said Albrecht. Revenues from trading declined as the company took on less risk across most asset classes, while principal investments benefited from fewer real estate related writedowns.

Albrecht also said that Goldman's compensation and some volume related costs were lower than he anticipated, helping to boost the bottom line.

The analyst raised his 2009 earnings estimate by $1.83 to $18.95 per share and lifted his target price by $11 to $216.

Lazard Ltd. (LAZ)

Oppenheimer downgrades to perform from outperform

Oppenheimer analyst Chris Kotowski said on Oct. 15 that Lazard announced after the close of trading Oct. 14 that CEO Bruce Wasserstein died unexpectedly. Wasserstein will be replaced by Vice Chairman Steven Golub as interim CEO.

While Kotowski stressed that Lazard has a broad based business that isn't overly dependent Mr. Wasserstein personally, the analyst didn't change his $45 price target, but downgraded the shares. He noted that CEO transitions typically involve a period of disruption, as cmpanies tend to become internally focused; also, recruiting senior executives is harder until a new leadership team is settled.

Travelers Cos. (TRV)

Employers Holdings (EIG)

Navigators Group (NAVG)

Keefe Bruyette & Woods downgrades each to market perform from outperform

Hanover Insurance Group (THG)

Keefe Bruyette & Woods removes from best ideas stock list

An improving financial outlook for property and casualty insurers means they may not be able to raise rates on customers and may have to drop prices, said Keefe Bruyette & Woods analyst Cliff Gallant on Oct. 15, downgrading shares of Travelers Cos. and two other insurers.

A rebound in investment portfolios and a weak hurricane season in the U.S. mean third quarter results will likely be strong, Gallant said in a note to investors. The downside of that is the insurers will have plenty of capital on hand to cover claims from clients and will not be able to raise rates, he wrote.

When insurers' investment income drops, they may have to raise rates to pay off clients' claims. An abundance of capital means there's less pressure on pricing.

Gallant downgraded Travelers, Employers Holdings, and Navigators Group despite the companies' "strong fundamental outlooks. He also removed Hanover Insurance Group Inc. from a "best ideas" stock list.

"We expect this combination of low growth, low investment yields and depleting reserves to lead to lackluster mid-single-digit returns for the industry," Gallant wrote.

Bill Barrett Corp. (BBG)

SunTrust Robinson Humphrey upgrades to buy from neutral

Bill Barrett Corp. shares are positioned to rise, said SunTrust Robinson Humphrey analyst John Gerdes on Oct. 15 as he upgraded the natural gas and oil producer's stock, citing its "unjustified" 40% discount to its sector peers.

Bill Barrett is well-positioned, given its array of gas development opportunities in the Rocky Mountains, diverse properties and highly competitive technical understanding of Rocky Mountain gas-producing formations, Gerdes said.

Adding to the good news, Gerdes noted, is the company's emerging resource potential in the Paradox Basin Gothic Shale. He added that the company's November earnings conference call could be a positive catalyst for the shares if it successfully improves well productivity and addresses salt intrusion issues at these properties.

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