OPPENHEIMER CUTS ESTIMATES ON WACHOVIA, OTHER BANKS
Oppenheimer analyst Meredith Whitney sayss banks under her coverage have written down over $64 billion to date, increased loan loss reserves by $73 billion-plus and raised $96 billion-plus in capital. She says the net effect has been over $42 billion in capital destruction.
Whitney expects further dividend cuts and capital raises. She estimates loan loss provisions within her universe in 2008 and 2009 will be $40 billion greater than write-downs seen through the second quarter 2008: she sees $95 billion in provisions in 2008 and $104 billion in 2009.
For Wachovia (WB), her third quarter view goes to $0.31 loss from $0.15 loss, 2008 goes to $5.18 loss from $5.00 loss, and 2009 unchanged at $1.00 loss. She rates Wachovia underperform.
She also cuts estimates for Bank of America (BAC), Citigroup (C), JM Morgan (JPM) and Wells Fargo (WFC). She says her revised estimates are 50% below consensus for 2008 and 90% below for 2009.
MERRILL DOWNGRADES GENERAL ELECTRIC TO NEUTRAL FROM BUY
Merrill Lynch analyst John Inch says General Electric's (GE) GE Capital unit should face growing fundamental pressures; he sees earnings of both GE Commercial Finance and GE Money falling 15% in 2009. He cuts $2.42 2009 EPS estimate to $2.22 and $2.65 for 2010 to $2.48, both significantly below consensus.
Inch says near-term financial market turmoil and economic weakness could still drag GE's profits below his forecast. He thinks the downside risk to GE's AAA credit rating should ease as liquidity concerns abate, but sees better opportunities within his coverage universe for more significant stock price appreciation with likely lower downside risk.
He believes GE is now more fairly valued, and cuts price objective to $28 from $37.50.
JEFFERIES DOWNGRADES CIRCUIT CITY TO UNDERPERFROM FROM HOLD
Jefferies analyst Daniel Binder says Circuit City Stores' (CC) upcoming earnings should illustrate CC is losing market share at a faster pace than before, which could lower employee, shopper, vendor confidence heading into the holiday season.
The stepping down of its CEO leads him to believe that sales are getting worse, even as management achieves a slightly better pre-tax result vs. previous expected loss. Despite efforts to stabilize the business and benefits from tax rebates, he believes sales continued to decline at faster pace this quarter; he cuts same-store sales estimate to down 14%-16% from down 8%.
While investors may initially applaud the management change, he thinks investors should sell into any strength. He cuts his price target to $1.25.