Markets & Finance

Analyst Actions: Legg Mason, Steel Industry


From Standard & Poor's Equity ResearchCREDIT SUISSE DOWNGRADES LEGG MASON TO UNDERPERFORM FROM NEUTRAL

Credit Suisse analyst Craig Siegenthaler says his downgrade of Legg Mason (LM) follows the restructuring of some of the large structured investment vehicles (SIVs) and rebound in LM share price.

Siegenthaler notes that over the next year, his expectations that LM will miss EPS estimates (or face negative revisions) and experience highest level of net redemptions as a percentage of assets under management among the public managers are the core arguments supporting his underperform rating. He believes the potential increase in supply of investment management institutions for sale, including three Ohio bank subsidiaries (National City (NCC), Fifth Third Bancorp (FITB) and KeyCorp (KEY)) and Neuberger Berman (by Lehman Brothers (LEH)), has lowered the private market value for LM.

He keeps $1.90 fiscal year 2009 (March) and $3.30 fiscal year 2010 EPS estimates.

GOLDMAN DOWNGRADES ITS VIEW ON STEEL INDUSTRY TO NEUTRAL FROM ATTRACTIVE

Goldman Sachs analyst Sal Tharani says that recent concerns about a global economic slowdown, inflation fears in emerging economies, a seasonal slowdown in steel demand and thus softening of prices in the near term, and fuzzy data out of China could, in his view, overshadow relatively healthy longer term fundamentals.

He lowers steel price estimates by an average of 6% for the second half of 2008 and 2009. He also lowers 2008 and 2009 EPS estimates by 1% and 7%, respectively. And he cuts target prices by an average of 18% across his coverage universe (he cuts United States Steel (X) target to $182 from $244.)

He says Nucor (NUE) and United States Steel remain buys, but he removes United States Steel from his Conviction Buy List. He upgrades Steel Dynamics (STLD) to buy, replacing Commercial Metals (CMC), which is now rated neutral. Worthington Industries (WOR), and Gibraltar Industries (ROCK) remain sells.


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