Analyst Picks and Pans

Analyst Picks and Pans: FITB, SYMC, TEN


Fifth Third Bancorp (FITB)

KBR Capital Markets upgrades to outperform from market perform

KBR Capital Markets analyst David Konrad said on May 7 that despite the stock's recent push higher, it is still a value buy. He doubled his target price on the stock to $8.

Konrad said in a note to investors that he believes the government's stress test -- its gauge of which 19 major banks would need additional capital to bolster balance sheets against a worsened recession -- will show that Fifth Third needs about $1.1 billion in capital. The bank can raise the funds by converting preferred securities to common equity, he said.

The likely capital needs of $1.1 billion are "manageable," Konrad said. Even if the government's test says that Fifth Third needs to raise more than $1.1 billion and the bank is forced to convert the government's stake of preferred shares into common shares, resulting in government ownership, it would be a short-term situation, Konrad said. Fifth Third could sell or spin off assets to raise the capital, he said.

Symantec Corp. (SYMC)

Jefferies downgrades to hold from buy

Jefferies analyst Katherine Egbert said on May 7 she's concerned that

revenue weakness at Symantec is more than macro-related. Based on first-quarter results, she believes Symantec might be losing market share to rival McAfee (MFE). Egbert said she likes Symantec's new leadership, but "they have a lot of work to do."

She noted that Symantec's $0.38 fourth-quarter non-GAAP EPS and $1.49 billion revenue were a mixed bag, while the company's first-quarter guidance (non-GAAP revenue of $1.45 billion-1.51 billion, EPS of $0.34-$0.36) was weak. The analyst cut her first-quarter view to $1.46 billion/$0.35 from

$1.54 billion/$0.38; and her fiscal 2010 (March) forecast to $5.69 billion/$1.33 from $6.33 billion/$1.64. She set a fiscal 2011 view of $6.05 billion/$1.49.

Tenneco Inc. (TEN)

KeyBanc upgrades to buy from hold

KeyBanc analyst Brett Hoselton said on May 7 that while financial risk remains high, based on his liquidity analysis and his belief that lenders will grant covenant relief if needed, he thinks financial risk at Tenneco is manageable. He also thinks risks associated with a GM/Chrysler bankruptcy appear manageable. Hoselton believes EPS and free cash flow will improve sequentially, driven by a combination of improving production and restructuring savings.

Hoselton thinks improving retail auto financing and used car trends portend a rise in U.S. new car sales, which will serve as a positive catalyst. He has a $12 12-month price target.


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