UPDATE 2-RESEARCH ALERT-Analysts cut Merrill 2008 EPS view

viernes 18 de abril de 2008 16:20 CEST
 

 (Adds details)
 April 18 (Reuters) - At least four brokerages, including
Banc of America and Lehman, cut their 2008 earnings estimates
on Merrill Lynch & Co MER.N, while a fifth forecast a loss
for the company, after it posted its third straight quarterly
loss and said it planned to cut 2,900 more jobs.
 Banc of America analyst Michael Hecht said incremental
markdowns of about $3 billion that he expected for world's
largest brokerage over the course of 2008, along with a lower
level of activity across global markets and investment were the
main drivers behind the estimate cuts on Merrill.
 Oppenheimer's Meredith Whitney, however, raised her
earnings estimates on the company, but said future losses are
highly probable at Merrill and that further capital raises
would be needed, given that housing fundamentals had yet to
improve and that the state of the consumer had shown signs of
stress.
 Merrill's Chief Executive John Thain had said that the bank
was well capitalized, but in a conference call with reporters
said the company may look to issue preferred shares similar to
JPMorgan Chase & Co's (JPM.N: Cotización) $6 billion sale on Wednesday.
 In January and earlier this month, Thain said Merrill Lynch
was not looking to raise more capital.
 Moody's Investors Service said it is reviewing whether
Merrill Lynch can improve its capital position amid continued
difficult market conditions, and may cut the company's debt
ratings.
 "While Merrill is making progress on de-leveraging its
balance sheet and the worst of the writedowns could be over, we
think EPS could remain under pressure as Merrill still has
significant exposure to problem assets," UBS analyst Glenn
Schorr said.
 Analyst Kenneth Worthington at JP Morgan said he expected
valuation declines in the residential and commercial mortgages
to continue hurting the company's marks and revenue. He added
that benefits from spread widening on Merrill's own debt would
hurt earnings in a recovery.
 Lehman Brothers said there was more intermediate downside
to the stock given the economic outlook, along with sizeable
gross exposures to illiquid assets on the company's balance
sheet, among other factors, adding that it saw Morgan Stanley
(MS.N: Cotización) relatively more attractive to Merrill.
 Merrill Lynch hasn't turned a profit since the
second-quarter of last year. Since then, the company has
recorded more than $30 billion of write-downs and credit
losses, spurring it to raise over $12 billion of new capital.
 "While the current market environment remains tough, it's
not unreasonable to think that some of the reserve build
related to the financial guarantors as well as some of the
writedowns in the bank portfolio will eventually be written
back up several quarters down the road," analyst Prashant
Bhatia at Citigroup said.
 Bhatia, who forecast a loss for Merrill to reflect the
challenging market environment, said the company may not have
to raise more capital and that he expected it to return to
profitability starting the next quarter.
 Following are the price targets and 2008 and 2009 earnings
estimate changes made by the four brokerages:
 Brokerage        Rating         Price target   2008 EPS view 
 2009 EPS view
                              New    Old     New    Old    
 New    Old
 Banc of America  Buy            $53    $56     $0.01  $1.00  
 $4.63  $5.38
 Lehman           Equal Weight   $49    $52     $0.40  $0.89  
 $4.29  $4.46
 Wachovia         Market Perform  --    --      $0.15  $0.47  
 $3.84  $4.20
 Oppenheimer      Underperform    --    --      $1.15  $0.20  
 $5.25  $5.10
 JP Morgan        Neutral         --    --      $0.86  $1.46  
 $4.85  $4.94
 Citigroup        Buy            $75    --     -$1.00  $1.20  
 $5.10  $5.10
 UBS              Neutral        $49    $52      --     --    
 $5.15  $5.30
 Shares of the Merrill rose about 2 percent to $47.61 in
morning trade on the New York Stock Exchange.
  (Reporting by Ramya Dilip in Bangalore; Editing by Jarshad
Kakkrakandy)