OPPENHEIMER KEEPS PERFORM ON JPMORGAN CHASE
Oppenheimer analyst Meredith Whitney notes that the FDIC seized Washington Mutual's (WM), sold $188 billion of deposits, substantially all of its assets to JPMorgan Chase (JPM) for $1.9 billion. She says JPM also announced an $8 billion common equity offering, expected to price before market opens Friday.
Whitney notes that JPM looked at WM for months, and to its advantage, waited with discipline on price. She says WM's deposits gives JPM pro forma deposit total of $911 billion, making it largest depository in the U.S. She notes that largest U.S. thrift just failed, and did so seamlessly with commendable stewardship of FDIC.
She says JPM estimates that the acquisition will be $0.50 accretive to earnings per share in 2009, $0.60 in 2010, $0.70 in 2011. She sees $1.65 2008 EPS (28% below $2.29 consensus) and $1.45 for 2009 (55% below $3.19 consensus).
CITIGROUP DOWNGRADES RESEARCH IN MOTION TO HOLD FROM BUY
Citigroup analyst Jim Suva says his investment thesis on Research In Motion Limited (RIMM) has changed due to RIMM's inability to maintain margins (51% in August-quarter, but the company guided to only 47% in November, going to mid-40% in fiscal year 2009 vs. his original estimate of 49%).
Suva otes aggressive ramping of consumer products coupled with slowing enterprise Blackberry spend and a likely push for higher marketing/subsidy spend in both the enterprise and consumer markets create additional headwinds.
Given these higher competitive threats, also cuts Motorola (MOT) to hold from buy, saying RIMM's increased competition via new products and marketing/subsidy spend removes some of MOT's potential upside especially in the fourth quarter and beyond.
CITIGROUP DOWNGRADES CF INDUSTRIES, TERRA, AGRIUM TO HOLD FROM BUY
Citigroup analyst Brian Yu says the trade press FMB indicates urea (a solid nitrogen product) prices fell sharply this week, with U.S. prices at $575/ton (from $705/ton last week), Black Sea at $645/tonne ($765/tonne last week), offer prices out of Middle East at about $700/tonne ($835/tonne).
Yu says risk is that urea prices continue to decline as buyers delay purchases and draw down inventories deeper than usual in anticipation of even lower prices. He notes that the timing and extent of feedback loop is nearly impossible to predict and quantify, but it could take weeks or months to play out.
He downgrades North American fertilizer producers CF Industries Holdings (CF), Terra (TRA) and Agrium (AGU) due to their substantial exposure to nitrogen.