From Standard & Poor's Equity ResearchUBS FINANCIAL DOWNGRADES WACHOVIA TO NEUTRAL FROM BUY
UBS analyst Matthew O'Connor says his downgrade of Wachovia (WB) reflects the increasing likelihood of a large capital raise at a time when the window for banks to raise capital may be quickly closing, as well as increasing pressures in the credit, financial and housing markets.
O'Connor notes he's assumed $5 billion common equity raise (at $10/share, which may prove bit optimistic) and reduction in the dividend to $0.01 will save WB about $3 billion annually. He estimates pro forma tangible book value of $11-$12 per share.
He cuts EPS estimates from $0.38 for 2008 to a $1.98 loss, and $2.00 2009 EPS to $1.25 EPS. He lowers $18 12-month target to $12.50.
JP MORGAN UPGRADES DEAN FOODS TO OVERWEIGHT FROM NEUTRAL
JP Morgan analyst Terry Bivans says he believes Dean Foods (DF) shares have been oversold on fears of coming dairy inflation and current spikes in energy and resin costs. He thinks dairy costs will drop year-over-year for the next 18 months, and believes that high feed costs are likely behind the stock's recent swoon.
However, Bivens says he believes dairy farming remains quite profitable and cuts in production are unlikely. He also believes that the company appears better able to pass along fuel and resin costs.
He says substantial returns over a short horizon appear reasonable to him. He believes shares of DF could appreciate by 20%-plus by yearend.
MORGAN KEEGAN UPGRADES OWENS CORNING TO OUTPERFORM FROM MARKET PERFORM
Morgan Keegan analyst J. Keith Johnson says, while he realizes Owens Corning (OC) is facing continued challenges in the building material segments, he feels it is well positioned in its markets, and the combination of the current price, valuation and business trends offers some upside to the share price.
Johnson raises 2008 adjusted EPS estimate to $0.83 from $0.65; for the second quarter he now sees $0.24 adjusted EPS. He says the main driver in his estimate changes is better performance in the roofing and asphalt segment than previously forecast.
Improved demand as a result of storm damage thus far in 2008, and higher selling prices as a result of recently announced price increases should benefit performance of this segment, he says.