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Zacks #5 Rank Additions for Thursday – Zacks Tale of the Tape

Zacks Market Commentaries — Thu, 22 Oct 2009 12:23:23 +0000

Here are the stocks added to the Zacks #5 Rank ("strong sell") List today:

American Water Works Co Inc (AWK)
Amerigas Partners LP (APU)
Associated Banc-Corp (ASBC)
Benchmark Electronics Inc (BHE)
Benihana Inc (BNHNA)
BMP Sunstone Corp (BJGP)
Cape Bancorp Inc (CBNJ)
China Nepstar Chain Drugstore Ltd (NPD)
Conmed Corp (CNMD)
Crucell NV (CRXL)
Duke Energy Corp (DUK)
Empire District Electric Co (EDE)
Emulex Corp (ELX)
Encore Wire Corp (WIRE)
Fair Isaac Corp (FICO)
FelCor Lodging Trust Inc (FCH)
General Moly Inc (GMO)
Hanmi Financial Corp (HAFC)
Hawaiian Holdings Inc (HA)
Keycorp (KEY)
Mack-Cali Realty Corp (CLI)
Martin Marietta Materials Inc (MLM)
Mercantile Bank Corp (MBWM)
Merit Medical Systems Inc (MMSI)
Navios Maritime Partners LP (NMM)
Onyx Pharmaceuticals Inc (ONXX)
PMI Group Inc (PMI)
Progress Energy Inc (PGN)
Raser Technologies Inc (RZ)
Ritchie Bros Auctioneers Inc (RBA)
Shiner International Inc (BEST)
Sigma Designs Inc (SIGM)
Simcere Pharmaceutical Group (SCR)
Stanley Furniture Co Inc (STLY)
Ultrapetrol Bahamas Ltd (ULTR)
Unisource Energy Corp (UNS)
United Bankshares Inc (UBSI)

KeyCorp Misses, Loss Widens – Analyst Blog

Zacks Market Commentaries — Wed, 21 Oct 2009 17:07:57 +0000

KeyCorp’s (KEY) third quarter loss from continuing operations of 50 cents per share was substantially worse than the Zacks Consensus Estimated loss of 39 cents. This compares unfavorably to a net loss from continuing operations of 2 cents in the prior-year quarter.

Results were primarily hurt by an increase in the provision for loan losses, write-downs of certain real estate-related investments, higher costs associated with other real estate-owned (OREO) assets and the write-off of certain intangibles. The downside also resulted from a 6.2% sequential increase in loan loss reserve to $2.5 billion, representing 4.00% of period-end loans and 108.5% of non-performing loans.

Provisions for loan losses from continuing operations reached $733 million, compared to $336 million in the prior-year quarter. It exceeded net loan charge-offs by $146 million as KeyCorp continued to add to its reserves.

Tax-equivalent net interest income increased 4.2% sequentially to $599 million. This increase was primarily a result of a 10 basis-point (bps) increase in net interest margin (NIM) to 2.80% as a result of re-pricing maturing certificates of deposit at lower market rates, new or renewed loans with more favorable interest rate spreads, and increasing the securities available-for-sale portfolio using excess cash flows from loan repayments and deposit flows. However, during the third quarter of 2009, KeyCorp terminated certain leveraged lease financing arrangements, which reduced net interest income by $14 million and decreased the NIM by approximately 7 bps.

Non-interest income for the quarter decreased 45.9% sequentially and 2.1% year-over-year to $382 million. The year-over-year decrease was primarily attributable to a $26 million loss resulting from changes in the fair values of certain investments made by the Funds Management unit within the Real Estate Capital and Corporate Banking Services line of business, a $20 million loss resulting from changes in the fair values of certain commercial mortgage-backed securities held in the trading portfolio, and a $12 million charge resulting from an increase in the reserve for losses related to customer derivatives.

Non-interest expense for the quarter increased 5.4% sequentially and 21.8% year-over-year to $901 million. On a year-over-year basis, personnel expense increased by $6 million, due primarily to higher costs associated with employee benefits. Non-personnel expense for the quarter increased by $155 million.

Credit quality metrics worsened significantly during the quarter. Non-performing assets as a percentage of portfolio loans, OREO as well as other non-performing assets increased 69 bps sequentially and 277 bps year-over-year to 4.46%. Net charge-offs as a percentage of average loans increased 66 bps sequentially and 231 bps year-over-year to 3.59%.

Capital ratios continued to improve during the quarter as KeyCorp successfully exchanged common shares for retail capital securities, raising $505 million of additional Tier 1 common equity. This completed a series of successful capital raises and exchanges that generated approximately $2.4 billion of new Tier 1 common equity to bolster the company's overall capital.

KeyCorp's tangible shareholders’ equity to tangible assets ratio was 10.41% at the end of Sept. 30, 2009, compared to 10.16% at the end of the prior quarter and 6.95% at the end of the prior-year quarter. Tier 1 risk-based capital ratio was 12.61%, compared to 12.57% in the prior quarter and 8.55% in the prior-year quarter.

Though we expect the company to benefit by exiting the risky and unprofitable businesses, elevated provision requirements and a weak net interest margin will put significant pressure on its profitability. As such, the shares carry an Underperform recommendation from us.
Read the full analyst report on "KEY"
Zacks Investment Research

Zacks #5 Rank Additions for Monday – Zacks Tale of the Tape

Zacks Market Commentaries — Mon, 19 Oct 2009 12:14:14 +0000

Here are the stocks added to the Zacks #5 Rank ("strong sell") List today:

Anglo American PLC (AAUKY)
Benihana Inc (BNHN)
Benihana Inc-A (BNHNA)
BlackRock Kelso Capital Corp (BKCC)
BMP Sunstone Corp (BJGP)
Cape Bancorp Inc (CBNJ)
Capstone Turbine Corp (CPST)
Celadon Group Inc (CLDN)
China Nepstar Chain Drugstore Ltd (NPD)
Conmed Corp (CNMD)
Datalink Corp (DLTK)
DemandTec Inc (DMAN)
Emulex Corp (ELX)
Encore Wire Corp (WIRE)
Extreme Networks (EXTR)
Fair Isaac Corp (FICO)
General Maritime Corp (GMR)
Hanmi Financial Corp (HAFC)
HUB Group Inc (HUBG)
i2 Technologies Inc (ITWO)
Innerworkings Inc (INWK)
Kayne Anderson Energy Development Co (KED)
Keycorp (KEY)
Molina Healthcare Inc (MOH)
Navios Maritime Partners LP (NMM)
Oriental Financial Group Inc (OFG)
Rosetta Stone Inc (RST)
Ryland Group Inc (RYL)
Sandy Spring Bancorp Inc (SASR)
School Specialty Inc (SCHS)
Sigma Designs Inc (SIGM)
Simcere Pharmaceutical Group (SCR)
T-3 Energy Services Inc (TTES)
TC Pipelines LP (TCLP)
Telefonos de Mexico SAB de CV (TMX)
Terra Industries Inc (TRA)
White Electronic Designs Corp (WEDC)
Wilshire Bancorp Inc (WIBC)

U.S. Banks – Industry Outlook

Zacks Market Commentaries — Tue, 13 Oct 2009 19:19:14 +0000

After enduring extraordinary shocks in 2008, the U.S. banks entered an exceptional state of turmoil in 2009. Starting as a credit issue in the subprime segment of the mortgage market, the sticky situation spread to almost the entire financial services industry, and all corners of the globe. In other words, the financial crisis ultimately morphed into a massive economic crisis, which has had major ramifications across the whole world.

Although the banking industry is dealing with liquidity and confidence challenges, it now has financial support from the U.S. government. The government has taken several steps, including programs offering capital injections and debt guarantees, to stabilize the financial system.

We believe that the worst of the credit crisis is now probably behind us. After almost a year of initiating the $700 billion Troubled Asset Relief Program (TARP), a lot has improved with respect to the economic crisis, but the banking system is not yet out of the woods as there are persistent problems that need to be addressed by the government before shifting the strategy to growth. We believe that the U.S. economy will regain its growth momentum once these issues are resolved.

While the bigger banks benefited greatly from the various programs launched by the government, many smaller banks are still in a very weak financial state and the Federal Deposit Insurance Corporation’s (FDIC) list of problem banks continues to grow. In the second quarter of 2009, the number of banks on the FDIC's list of problem institutions grew to 416 from 305 in the first quarter. This is the highest number since the savings and loan crisis in 1994.

Despite the government’s heavy efforts, we continue to see bank failures. Increasing loan losses on commercial real estate are expected to cause more bank failures in the next few years. The FDIC anticipates the bank failures to cost about $70 billion over the next five years. Furthermore, government efforts have not succeeded in restoring the lending activity at the banks. Lower lending will continue to hurt margins, though the low interest rate environment should be beneficial to the banks with a liability-sensitive balance sheet.

Out of the $240 billion given to banks, $70 billion has come back as the healthiest banks have started repaying TARP funds. The Treasury Secretary estimates that banks will repay another $50 billion over the next 12 to 18 months. Also, taxpayers have received decent returns on many of its financial-sector investments. Repayments under the TARP have generated a 17% annualized return from stock-warrant repurchases and $12 billion in dividend payments from dozens of banks.

Many of the financial institutions that have already repaid the bailout money include JPMorgan Chase (JPM), American Express (AXP), Goldman Sachs (GS), Morgan Stanley (MS), Capital One (COF), BB&T (BBT) and US Bancorp (USB). Also, banks like Bank of America (BAC), Wells Fargo (WFC) and Citigroup (C) are expected to exit TARP over the next 12 to 18 months.

However, the situation is going to be reversed as regulators are considering asking healthy banks to bail out the government soon, in order to replenish the FDIC’s coffers. The increasing number of bank failures has caused a rapid decline in the FDIC’s funds as it has been appointed receiver for the failed banks.

Also, following the U.S. Treasury’s announcement requiring the world’s banks to maintain stronger capital and liquidity standards by the end of next year to prevent a re-run of the global financial crisis, 15 large banks that control the majority of derivative trading worldwide have committed themselves to maintaining greater transparency in the $600 trillion market that needs stricter oversight in the interest of the global financial system.

However, there are lingering concerns related to the banking industry as well as the economy. Continued asset-quality troubles are expected to force many banks to record substantial additional provisions for the remainder of 2009 and all of 2010. This will be a drag on the profitability of many banks for extended periods and will further add stress to their capital levels.

For the last few quarters, the banks have mainly suffered due to the losses in mortgages and Commercial Real Estate (residential construction loans). Housing prices have continued to decline, and given the sharp increase in the level of unemployment we anticipate continued losses in these portfolios.

Furthermore, deterioration in other Commercial Real Estate loans is now rising at a rapid pace and the downturn in this class is also likely to emerge as a major challenge. Given the negative macro backdrop, we expect losses to continue to increase in the other asset classes as well, especially in consumer-related loans.

While the state of the economy is showing signs of recovery, a lot remains to be done. The Treasury continues to have huge direct investments in institutions like American International Group (AIG), Fannie Mae (FNM) and Freddie Mac (FRE).

We expect loan losses on commercial real estate portfolio to remain high for banks that hold large amounts of high-risk loans. Also, as a result of a rise in charge-offs, the levels of reserve coverage have fallen over the past quarters and the banks will have to make higher provisions in the coming quarters, affecting their profitability. We think that the financial crisis is far from over and we have to wait for a while to write the end line of the crisis story.

OPPORTUNITIES

The Treasury’s requirement of focusing banking institutions towards higher-quality capital will help banks absorb big losses. Though this would somewhat limit the profitability of banks, a proper implementation would bring stability to the overall sector and hopefully address bank failures.

We favor Commerce Bancshares Inc. (CBSH) in this space since this company is one of the few names that did not report losses even during the current financial crisis. We believe that Commerce is one of the best capitalized banks in the industry and will generate positive earnings throughout the credit cycle. While the bank had a decent growth in deposits in the most recent quarter, trends in its credit metrics were in the negative direction.    

WEAKNESSES

The financial system is going through massive de-leveraging. Banks in particular have lowered leverage. The implication for banks is that the profitability metrics (like returns on equity and return on assets) will be lower than in recent years. Furthermore, the current crisis has dramatically accelerated the consolidation trend in the industry. As a result, failure of a large financial institution will be a major concern in the upcoming quarters as weaker entities are absorbed by larger ones.

We think banks with high exposure to housing and Commercial Real Estate loans, like Wilmington Trust Corporation (WL), KeyCorp (KEY) and Zions Bancorp (ZION), will remain under pressure.

Zacks Investment Research

Keycorp’s MACD Signals Bearishness – Zacks Tale of the Tape

Zacks Market Commentaries — Fri, 09 Oct 2009 16:18:51 +0000

Keycorp’s (KEY) MACD indicator has moved into bearish territory with a reading of -0.0339. The Zacks #4 Rank (“Sell") stock fell more than 1.5% to $6.11 in morning trade. The full-year Zacks Consensus Estimate has worsened by 67 cents over the past 3 months and is pegged at a loss of $2.01 per share.
"KEY" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Zacks Bull and Bear of the Day Highlights: Medtronic, KeyCorp, Boeing, Textron and Ford – Press Releases

Zacks Market Commentaries — Thu, 27 Aug 2009 13:30:44 +0000

For Immediate Release

Chicago, IL – August 27, 2009 – Zacks Equity Research highlights Medtronic (MDT) as the Bull of the Day and KeyCorp (KEY) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Boeing (BA), Textron (TXT) and Ford (F).

Full analysis of all these stocks is available at http://at.zacks.com/?id=2676

Here is a synopsis of all five stocks:

Bull of the Day:

Medtronic’s (MDT) long-term story is intact - product approvals and launches will drive healthy top-line growth. This was witnessed in the first quarter when the company reported sales growth in all its operating segments.

Higher demand for pacemakers and ICDs has rejuvenated growth in the CRDM segment. This will bolster the company's strong position in the cardiac market against its closest rivals, Boston Scientific Corporation and St. Jude Medical.

First quarter earnings of 79 cents per share were higher than the Zacks Consensus Estimate of 78 cents and 72 cents, a year ago. We rate this stock Outperform with a target price of $43.

Bear of the Day:

KeyCorp's (KEY) second-quarter net loss came in at 69 cents per share, substantially worse than the Zacks Consensus Estimate. The downside primarily resulted from preferred dividend payment and a significant increase in the provision for loan losses.

Credit quality worsened significantly during the quarter. However, we are impressed by the company's steps to reduce its exposure to the commercial real estate (CRE) home builders business.

Though the company will benefited by exiting the risky and unprofitable businesses, we expect elevated provision requirements and a weak net interest to put significant pressure on its profitability. As such, the shares carry an Underperform recommendation from us.

Zacks Analyst Blog Highlights: Bank of America, Wells Fargo, KeyCorp, U.S. Bancorp and D.R. Horton – Press Releases

Zacks Market Commentaries — Wed, 26 Aug 2009 13:45:12 +0000

For Immediate Release

Chicago, IL – August 26, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Bank of America (BAC), Wells Fargo (WFC), KeyCorp (KEY), U.S. Bancorp (USB) and D.R. Horton (DHI).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Tuesday’s Analyst Blog:

Obama's Right Call on Bernanke

Though Bernanke's actions have at times been controversial (e.g. the Bank of America [BAC] takeover of Merrill Lynch), reappointing the Fed Chairman is the right move. Bernanke inherited a bad set of financial circumstances and moved boldly in his attempts to limit the damage. We may never know whether his actions prevented a depression from occurring, but in a crisis situation, action is always better than no action.

The next challenge for Bernanke will be his hardest, and a real test of how many lessons he learned from his analysis of the Great Depression. The Fed Chairman must keep inflation from spiraling out of control and, at the same time, prevent a double-dip recession. This will be very difficult, as the margin for error is almost nil.

His next actions must include removing the programs that have made essentially free capital available to Wells Fargo (WFC), KeyCorp (KEY), U.S. Bancorp (USB) and many other banks.

He also needs to ensure than the freeze on lending continues to melt, or else face an even worse housing crisis -- just as D.R. Horton (DHI) and many others are now starting to find stable ground. At the same time, he may have to battle higher commodity prices, a weaker dollar and other inflationary pressures.

If Bernanke screws up, we will see a return of stagflation, or worse. If he makes the right policy moves, and gets the necessary fiscal restraint from Congress, he could successfully engineer a return to a lengthy period of economic growth.

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Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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Zacks Investment Research

Obama’s Right Call on Bernanke – Analyst Blog

Charles Rotblut — Tue, 25 Aug 2009 13:55:54 +0000

President Obama is reappointing Ben Bernanke as Fed Chairman. Though there will be those in Congress who disapprove, it is highly probable that Bernanke will keep his job after January 31st.

The move is part of a broader plan to keep the Obama economic team in place. A White House official told Politico.com, "The president wanted the team that has been working to rescue this economy together...This continuity is crucial."

Though Bernanke's actions have at times been controversial (e.g. the Bank of America [BAC] takeover of Merrill Lynch), reappointing the Fed Chairman is the right move. Bernanke inherited a bad set of financial circumstances and moved boldly in his attempts to limit the damage. We may never know whether his actions prevented a depression from occurring, but in a crisis situation, action is always better than no action.

The next challenge for Bernanke will be his hardest, and a real test of how many lessons he learned from his analysis of the Great Depression. The Fed Chairman must keep inflation from spiraling out of control and, at the same time, prevent a double-dip recession. This will be very difficult, as the margin for error is almost nil.

His next actions must include removing the programs that have made essentially free capital available to Wells Fargo (WFC), KeyCorp (KEY), U.S. Bancorp (USB) and many other banks.

He also needs to ensure than the freeze on lending continues to melt, or else face an even worse housing crisis -- just as D.R. Horton (DHI) and many others are now starting to find stable ground. At the same time, he may have to battle higher commodity prices, a weaker dollar and other inflationary pressures.

If Bernanke screws up, we will see a return of stagflation, or worse. If he makes the right policy moves, and gets the necessary fiscal restraint from Congress, he could successfully engineer a return to a lengthy period of economic growth.

Unfortunately, the odds are stacked against Bernanke and the entire Obama economic team. It's not that we won't see growth next year, but rather we also see potential for further economic problems in 2011 and 2012. Fortunately, the Fed Chairman appears to understand these risks, and that is precisely why he should get a second term.

Charles Rotblut, CFA is the senior market analyst for Zacks.com.
Read the full analyst report on "BAC"
Read the full analyst report on "WFC"
Read the full analyst report on "KEY"
Read the full analyst report on "USB"
Read the full analyst report on "DHI"
Zacks Investment Research

Zacks Bull and Bear of the Day Highlights: Expedia Inc., KeyCorp., Bank of America, Wells Fargo and PNC Financial – Press Releases

Zacks Market Commentaries — Fri, 21 Aug 2009 14:00:04 +0000

For Immediate Release

Chicago, IL – August 21, 2009 – Zacks Equity Research highlights Expedia Inc. (EXPE) as the Bull of the Day and KeyCorp. (KEY) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Bank of America (BAC), Wells Fargo (WFC) and PNC Financial (PNC).

Full analysis of all these stocks is available at http://at.zacks.com/?id=2676

Here is a synopsis of all five stocks:

Bull of the Day:

Expedia Inc. (EXPE) is one of the leading online travel companies in the world. The company reported strong results in the last quarter, beating the consensus estimate. Although bookings continue to be impacted by the recession, management has taken promotional measures to improve the conversion rate.

We are also positive about international initiatives, which we think will be the key to future growth. Cost management, a favorable online advertising environment and solid financials are other encouraging factors. In comparison, the possibility of increased occupancy taxes and low growth in Egencia (the smallest segment) seem less significant.

However, the declining average daily rates could be something to watch. We are initiating coverage of EXPE shares with an OUTPERFORM rating.

Bear of the Day:

KeyCorp.’s (KEY) second-quarter net loss came in at 69 cents per share, substantially worse than the Zacks Consensus Estimate. The downside primarily resulted from preferred dividend payment and a significant increase in the provision for loan losses.

Credit quality worsened significantly during the quarter. However, we are impressed by the company's steps to reduce its exposure to the commercial real estate (CRE) home builders business.

Though the company will benefit by exiting its risky and unprofitable businesses, we expect elevated provision requirements and a weak net interest to put significant pressure on its profitability. As such, the shares carry and Underperform recommendation from us.

Elavon Extends KeyCorp JV – Analyst Blog

Zacks Market Commentaries — Wed, 19 Aug 2009 18:15:18 +0000

Elavon, a part of U.S. Bancorp (USB) said on Tuesday that it has extended its joint venture agreement with KeyCorp (KEY) for the latter’s merchant referral business for another three years.

The leading global card acquirer, Elavon, markets its merchant processing services through KeyBank to business customers in 21 geographic districts straddling across a 13-state network of almost 1,000 commercial office and retail branch locations.

The extension of the agreement allows KeyBank to continue offering white-labeled merchant services supported by Elavon, which is solely dedicated to the payments industry. Elavon’s entire, robust solutions offerings are available to KeyBank merchants, from credit and debit processing to Dynamic Currency Conversion, Electronic Check, Gift Card, professional services and free online reporting.

As a strong leader in regional banking, KeyCorp provides exceptional value and innovation to Elavon’s customers, resulting in strong portfolio performance for the global card acquirer.

Weakening credit quality, net interest margin contraction and rating downgrades are major negatives for KeyCorp at this point, but the company is in the process of reducing its exposure to the home builders segment of its CRE business given the negative outlook for that segment.

During the last few quarters, KeyCorp’s total residential property exposure in CRE, including loans held for sale has reduced gradually. Also, the company has no subprime mortgage portfolio, credit card portfolio, or consumer auto loan portfolio.

Though the company will benefit from its initiatives to exit the risky and unprofitable businesses, we expect elevated provision requirements and a weak net interest to put significant pressure on profitability. As such, shares of KeyCorp carry an Underperform recommendation from us.
Read the full analyst report on "USB"
Read the full analyst report on "KEY"
Zacks Investment Research

Housing Price Declines Slow – Analyst Blog

Dirk Van Dijk — Tue, 28 Jul 2009 16:50:29 +0000

The Case Schiller home price data looks to be much better than I expected. The data is for May, and relative to April the composite 10 index rose by 0.41%, while the composite 20 index was up 0.45% -- on a not-seasonally adjusted basis!

There is some seasonality to the data, however, and when the seasonal adjustments come into play the C-10 fell by 0.21% and the C-20 was down by 0.16%. Still, this is a substantial decline in the pace of deterioration, with the C-10 down at an annualized rate of just 2.5% for the month and the C-20 falling at just a 1.7% rate. Compare this to the year-over-year rate of decline (including the May data) showing a 16.8% decline for the C-10 and a 17.1% decline for the C-20.

Some of the individual city data was interesting, and since the season affects all cities at the same time, the relative numbers are not likely to be affected. The graph below (from http://www.calculatedriskblog.com/) shows each of the 20 cities ranked by the declines from their individual peak levels based on the non seasonally adjusted data. By color it shows when the declines took place.

Not-seasonally adjusted, for the month, 14 cities were up and only six were down. However, on a year over year basis all 20 cities are showing lower prices. Seasonally adjusted, the numbers were 12 cities down and eight cities up.

The two cities (all city data discussed is seasonally adjusted) that have held up best since the top did pretty well in May -- prices in Dallas rose by 1.13% while Denver was up 0.3% for the month. On a year over year basis they are down just 4.1% and 4.6%, respectively. Given that both cities are heavily influenced by the energy industry, this is somewhat surprising with the price of oil and natural gas off as much as it is over the last year. On a year to date basis, Dallas is effectively unchanged and Denver is down just 1.8%.

However, the real winner for the month was Cleveland, where prices leapt by 2.78% for the month, leaving its year-over-year decline at just 6.2%. Cleveland was never much affected by the bubble on the way up, but was an early poster child for the declining rustbelt form of housing decline.

The resilience of Cleveland is very good news for the banks with big exposures to Ohio, like KeyCorp (KEY) and PNC Financial (PNC), which recently bought National City, as well as Fifth Third (FITB).

The cities that were most "bubbly" on the way up have been the hardest hit on the way down. The desert cities of Phoenix and Las Vegas have both seen prices more than cut in half and continue to have trouble, with Phoenix down 1.73% and Las Vegas down 3.08% on the month. This is bad news for the regional banks like Zions (ZION) that are focused on the desert Southwest. On a year over year basis they are down 34.2% and 32.0%, respectively.

Thus it does not seem like there is a leveling of the housing price declines, with cities that held up well early catching up with the early decliners. Rather, the pattern seems to be more of the poor getting poorer. There are some exceptions to this. The decline so far in 2009 for San Diego is relatively small (-4.7%), even though since the peak, it is a member of the -40% club.

Yes, the overall direction of housing prices is still down, especially if you account for the seasonality. However, the rate of decline is slowing pretty dramatically. This will in turn slow the number of people becoming underwater on their mortgages and will limit the depth for those that do slip below the waves. This is significant since most people will not walk away from the house (or simply stop paying and live there for a year or more until the sheriff shows up) if they are just a few thousand bucks underwater.

There is still some residual stigma to doing this in society, and it does hurt your credit rating. Plus, it often means pulling the kids out of school, etc. However, when it gets to the point when it looks like the value of the home will never again get to the level of the mortgage -- or if the homeowner runs into cash flow problems while the house is under water (i.e. gets laid off or his hours cut) -- that is the point the mortgage checks stop being written.

The slowing pace of decline brings the housing prices well within the “more adverse" scenario in the banks stress tests. Earlier this year, it looked as if they were tracking right along it while the unemployment rate was well above, calling into question if the "more adverse" was adverse enough. With the current data it looks as if it was tough enough (the bases case was WAY to optimistic) and is turning into a reasonably accurate forecast.

While far from ready to break into a chorus of “Happy Days Are Here Again," I have to put this report into the plus column, along with the new and existing home sales reports.

Read the full analyst report on "KEY"
Read the full analyst report on "PNC"
Read the full analyst report on "FITB"
Zacks Investment Research

Bumpy Q2 for Regional Banks – Analyst Blog

Zacks Market Commentaries — Wed, 22 Jul 2009 19:40:00 +0000

Results for regional banks may be dreadful in the second quarter 2009, as evidenced by the companies who have already reported their results.

Regions Financial Corp. (RF), Comerica Inc. (CMA) and ZION Bancorporation (ZION) reported losses in the quarter primarily due to continued strain in their loan portfolios, as the commercial sector continues to droop in the prolonged recession.

Along with continued losses in their residential mortgage, home equity and consumer loan portfolios, these banks are also showing continued distress in their residential and commercial development loans, as well as commercial real estate loans.

Large-cap center banks and brokerage firms like Goldman Sachs (GS), Bank of America (BAC) and JPMorgan Chase (JPM) were able to somewhat offset weak credit metrics by strong results in their investment banking and mortgage refinancing divisions.

Regional banks, however, are much more directly connected to the state of the economy and the interest rate spreads. Weak demand for lending as a result of a shaky economy can severely affect their profitability as borrowers, thereby increasing nonperforming assets.

The mounting credit concerns suggest that a majority of the regional banks reporting their earnings in the coming week will report losses. Banks reporting this week are Fifth Third Bancorp (FITB), Huntington Bancshares Inc. (HBAN), PNC Financial Services Inc. (PNC), SunTrust Banks, Inc. (STI), KeyCorp (KEY) and US Bancorp (USB).

Though commercial loan losses are seen as the final stage of a downtrend in a credit cycle, it still remains to be seen just how severe it turns out to be.

Read the full analyst report on "RF"
Read the full analyst report on "CMA"
Read the full analyst report on "ZION"
Read the full analyst report on "FITB"
Read the full analyst report on "HBAN"
Read the full analyst report on "PNC"
Read the full analyst report on "STI"
Read the full analyst report on "KEY"
Read the full analyst report on "USB"
Zacks Investment Research

USB Exits Rescue Program – Analyst Blog

Zacks Market Commentaries — Thu, 16 Jul 2009 19:04:33 +0000

On July 15, U.S. Bancorp (USB) announced that it paid $139 million to buyback the stock warrants held by the U.S. Treasury Department. As part of the company’s participation in the U.S. Treasury’s Capital Purchase Program, the 10-year warrants were issued in November 2008. U.S. Bancorp entitled the Treasury to purchase 32.7 million common shares at an exercise price of $30.29 per share.

Last Friday, State Street Corp. (STT) said that it paid $60 million to repurchase its own warrants. U.S. Bancorp and State Street are among the 10 major financial services companies to be permitted by the federal regulators last month to repay the bailout money.

In May this year, the Federal Reserve conducted a Stress Test and concluded that U.S. Bancorp did not need any additional capital buffer. The decision came after estimating the adequacy of the company’s capital base under a hypothetical two-year scenario, considering adverse economic conditions than actually expected.

During May 2009, U.S. Bancorp made a public offering of its common stock and senior notes. Last month, the company redeemed the $6.6 billion of preferred stock issued to the Treasury under the Capital Purchase Program of the Emergency Economic Stabilization Act of 2008. The repurchase of warrants and the redemption of the preferred stock, essentially indicate the company’s final exit from the government’s financial rescue program. This will not only reduce government intervention but also maintain a strong capital base.

Besides U.S. Bancorp, the other banks that are not required to raise capital according to the Federal Reserve include American Express (AXP), Bank of New York Mellon (BK), BB&T (BBT) and Goldman Sachs (GS). However, banks such as Fifth Third Bancorp (FITB), KeyCorp (KEY), Regions Financial (RF), Citigroup (C) and Wells Fargo (WFC) were asked to raise capital.

With a wide range of product offerings, USB remains well positioned for organic growth. Its strong retail banking franchise and leadership in payment processing will continue to create growth opportunities, going forward.

During the first quarter of fiscal 2009, U.S. Bancorp continued to experience a growth in loans and earnings assets, reflecting acquisitions. Furthermore, we expect the company to benefit from strategic acquisitions and expense management. However, the stressed residential real estate markets and the mortgage-related industries along with the continued impact of the U.S. recession on commercial and retail customers will continue to weigh on U.S. Bancorp.

Prior to the scheduled release of second quarter financial results on Wednesday, July 22, 2009, we maintain our Hold rating on the shares.

Read the full analyst report on "USB"
Read the full analyst report on "STT"
Read the full analyst report on "AXP"
Read the full analyst report on "BK"
Read the full analyst report on "BBT"
Read the full analyst report on "GS"
Read the full analyst report on "FITB"
Read the full analyst report on "KEY"
Read the full analyst report on "RF"
Read the full analyst report on "C"
Read the full analyst report on "WFC"
Zacks Investment Research

USB – “Best Bank in US” – Analyst Blog

Zacks Market Commentaries — Thu, 16 Jul 2009 17:06:33 +0000

On July 14, U.S. Bancorp (USB) announced that it has been awarded the "Best Bank in the U.S." by Euromoney magazine as part of its 2009 Awards for Excellence. U.S. Bancorp's healthy performance during the economic turbulence in 2008 was lauded by the publication. As a leading financial markets magazine, Euromoney has been picking out the top performers in finance since 1992.

In May of this year, the Federal Reserve concluded that U.S. Bancorp did not need any additional capital buffer. The decision came after estimating the adequacy of the company's capital base under a hypothetical two-year scenario that involved economic conditions more adverse than actually expected.

Besides U.S. Bancorp, the other banks not required by the Federal Reserve to raise capital included American Express (AXP), Bank of New York Mellon (BK), BB&T (BBT) and Goldman Sachs (GS). However, banks such as Fifth Third Bancorp (FITB), KeyCorp (KEY), Regions Financial (RF), Citigroup (C) and Wells Fargo (WFC) were asked to raise capital.

U.S. Bancorp remains one of the more profitable large-cap banks in the industry, with a return on equity of 13.9% and a return on assets of 1.21% in 2008. With a wide range of product offerings, U.S. Bancorp remains well positioned for organic growth. Its strong retail banking franchise and leadership in payment processing should continue to create growth opportunities over time.

During May, U.S. Bancorp made a public offering of its common stock and senior notes. Last month, the company redeemed the $6.6 billion of preferred stock issued to the Treasury under the Capital Purchase Program of the Emergency Economic Stabilization Act of 2008. This will reduce government intervention while maintaining a strong capital base.

During the first quarter of fiscal 2009, U.S. Bancorp continued to experience a growth in loans and earnings assets, reflecting acquisitions. Going forward, we expect the company to benefit from strategic acquisitions and expense management. However, the stressed residential real estate markets and mortgage-related industries and the impact of the U.S. economic issues on commercial and retail customers will continue to overhang on U.S. Bancorp.

Prior to the scheduled release of second quarter financial results before market opens on Wednesday, July 22, 2009, we maintain our Hold recommendation on the shares.

Read the full analyst report on "USB"
Read the full analyst report on "AXP"
Read the full analyst report on "BK"
Read the full analyst report on "BBT"
Read the full analyst report on "GS"
Read the full analyst report on "FITB"
Read the full analyst report on "KEY"
Read the full analyst report on "RF"
Read the full analyst report on "C"
Read the full analyst report on "WFC"
Zacks Investment Research

Zacks Industry Outlook Highlights: Ocwen Financial Corp, Wilmington Trust Corporation, KeyCorp and Zions Bancorp – Press Releases

Zacks Market Commentaries — Tue, 14 Jul 2009 12:42:52 +0000

For Immediate Release

Chicago, IL – July 14, 2009 – Zacks.com announces the latest Industry Outlook. Today’s outlook from Zacks Equity Research analyst Neena Mishra discusses the U.S. Banks sector. Highlighted stocks include: Ocwen Financial Corp (OCN), Wilmington Trust Corporation (WL), KeyCorp (KEY) and Zions Bancorp (ZION).

Here is the latest on the U.S. Banks sector:

We recently upgraded our recommendation on Ocwen Financial Corp (OCN) to a Buy, as this company could be a major beneficiary of the President's Home Affordable Modification Plan, which provides incentives for loan modifications to the borrower, the investor, and the servicer. OCN was appointed by a major GRE as one of the servicers for the new pilot initiative launched to identify borrowers who are at a risk of foreclosure. Recently the Treasury extended TALF to include securities backed by servicing advances, which will provide comfort on the liquidity front.

Banks with high exposure to housing and Commercial Real Estate loans, like Wilmington Trust Corporation (WL), KeyCorp (KEY) and Zions Bancorp (ZION) will remain under pressure.

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Zacks Investment Research

U.S. Banks – Zacks Analyst Interviews

Zacks Market Commentaries — Tue, 14 Jul 2009 05:00:00 +0000

While the bigger banks benefited greatly from the various programs launched by the Federal Reserve, the Treasury and the FDIC and are now in a much better shape, many smaller banks are still in a very weak financial state and the FDICÕs list of problem banks continues to grow. Further, the Government efforts have not succeeded in restoring the lending activity at the banks.ÊLower lending activity will continue to hurt the margins though the low interest rate environment should be beneficial to the banks with a liability sensitive balance sheet. Ê

For the last few quarters, the banks have mainly suffered due to the losses in the mortgages and Commercial Real Estate (residential construction loans). Housing prices have continued to decline and given the sharp increase in the level of unemployment, we anticipate continued losses in these portfolios. Further, deterioration in other Commercial Real Estate loans is now rising at a rapid pace and the downturn in this class is also likely to be very challenging. Ê

With the deterioration in the overall economic environment, and rising job losses, we anticipate the losses will continue to increase in all the other asset classes as well, especially in the consumer related loans. It was recently reported that U.S. credit card delinquencies rose to a record high and are expected to rise further. We expect the asset quality deterioration to continue at least through the end of FY09.

As a result of the rise in charge-offs, the levels of reserve coverage have fallen over the past quarters and the banks will have to make higher provisions in the coming quarters, affecting the profitability. Despite increased provisioning over the past several quarters, the ratio of allowance for loan losses to non-performing loans dropped to 70% at March 31, 2009 from 100% a year ago.ÊAs a result of these substantial asset quality deterioration and the need to build reserves further, many banks will continue to be unprofitable in 2009.

OPPORTUNITIES

We recently upgraded our recommendation on Ocwen Financial Corp (OCN) to a Buy, as this company could be a major beneficiary of the President's Home Affordable Modification Plan, which provides incentives for loan modifications to the borrower, the investor, and the servicer. OCN was appointed by a major GRE as one of the servicers for the new pilot initiative launched to identify borrowers who are at a risk of foreclosure. Recently the Treasury extended TALF to include securities backed by servicing advances, which will provide comfort on the liquidity front. Ê

WEAKNESSES

Banks with high exposure to housing and Commercial Real Estate loans, like Wilmington Trust Corporation (WL), KeyCorp (KEY), Zions Bancorp (ZION) will continue remain under pressure.

We also continue to maintain Sell recommendation on Freddie Mac (FRE) and Sallie Mae (SLM) as we anticipate rising losses and increased provisions during FY09.Zacks Investment Research

U.S. Banks – Industry Outlook

Zacks Market Commentaries — Tue, 14 Jul 2009 05:00:00 +0000

OPPORTUNITIES

WEAKNESSES

Banks with high exposure to housing and Commercial Real Estate loans, like Wilmington Trust Corporation (WL), KeyCorp (KEY), Zions Bancorp (ZION) will continue remain under pressure.

We also continue to maintain Sell recommendation on Freddie Mac (FRE) and Sallie Mae (SLM) as we anticipate rising losses and increased provisions during FY09.Zacks Investment Research

U.S. Banks – Industry Outlook

Zacks Market Commentaries — Mon, 13 Jul 2009 15:39:02 +0000

We think that the worst of the credit crisis is now probably behind us, but the banking system is not yet out of the woods -- there are still many significant challenges ahead. The banks are now able to tap the debt markets without the FDIC’s support, and also access the equity markets as the investor confidence returns in the stronger banks. Many banks have already repaid the TARP funds to the Treasury.

While the bigger banks benefited greatly from the various programs launched by the Federal Reserve, the Treasury and the FDIC and are now in much better shape, many smaller banks are still in a very weak financial state and the FDIC’s list of problem banks continues to grow. Further, government efforts have not succeeded in restoring the lending activity at the banks. Lower lending activity will continue to hurt margins, though the low interest rate environment should be beneficial to the banks with a liability-sensitive balance sheet.

For the last few quarters, the banks have mainly suffered due to the losses in mortgages and Commercial Real Estate (residential construction loans). Housing prices have continued to decline, and given the sharp increase in the level of unemployment we anticipate continued losses in these portfolios. Further, deterioration in other Commercial Real Estate loans is now rising at a rapid pace and the downturn in this class is also likely to be very challenging.

With the deterioration in the overall economic environment and rising job losses, we anticipate the losses will continue to increase in all the other asset classes as well, especially in consumer-related loans. It was recently reported that U.S. credit card delinquencies rose to a record high and are expected to rise further. We expect the asset quality deterioration to continue at least through the end of FY09.

As a result of rise in charge-offs, the levels of reserve coverage have fallen over the past quarters and the banks will have to make higher provisions in the coming quarters, affecting their profitability. Despite increased provisioning over the past several quarters, the ratio of allowance for loan losses to non-performing loans dropped to 70% at March 31, 2009 from 100% a year ago. As a result of these substantial asset quality deterioration and the need to build reserves further, many banks will continue to be unprofitable in 2009.

OPPORTUNITIES

We recently upgraded our recommendation on Ocwen Financial Corp (OCN) to a Buy, as this company could be a major beneficiary of the President's Home Affordable Modification Plan, which provides incentives for loan modifications to the borrower, the investor, and the servicer. OCN was appointed by a major GRE as one of the servicers for the new pilot initiative launched to identify borrowers who are at a risk of foreclosure. Recently the Treasury extended TALF to include securities backed by servicing advances, which will provide comfort on the liquidity front.

WEAKNESSES

Banks with high exposure to housing and Commercial Real Estate loans, like Wilmington Trust Corporation (WL), KeyCorp (KEY) and Zions Bancorp (ZION) will continue remain under pressure.

We also maintain Sell recommendations on Freddie Mac (FRE) and Sallie Mae (SLM) as we anticipate rising losses and increased provisions during FY09.

Zacks Investment Research

KeyCorp Unlocks New Offering – Analyst Blog

Zacks Market Commentaries — Fri, 10 Jul 2009 18:01:22 +0000

On July 8, KeyCorp (KEY) announced the commencement of an offer to exchange its common shares for any and all Trust Preferred Securities of KeyCorp Capital V and KeyCorp Capital VI, and any and all Enhanced Trust Preferred Securities of KeyCorp Capital VIII, KeyCorp Capital IX and KeyCorp Capital X.

KeyCorp had recently said that with the successful closure of a previously announced exchange offer, the company believes that it has fulfilled the requirement under the Supervisory Capital Assessment Program or stress test - to generate $1.8 billion of tier 1 common equity capital.

Under terms of the offer, for each Trust Preferred Security of KeyCorp Capital V, KeyCorp Capital VI, KeyCorp Capital VIII, KeyCorp Capital IX and KeyCorp Capital X (the Capital Trusts) accepted, KeyCorp will issue a number of its common shares based on an exchange ratio which will be announced on August 3.

Further, for each of the above mentioned Trust Preferred Security tendered on or prior to 11:59 p.m. on July 21 (and not subsequently withdrawn), KeyCorp will issue a number of its common shares equal to the quotient of $22.00 divided by the Average VWAP. For each these Trust Preferred Security tendered after 11:59 p.m. on July 21, but prior to the expiration date of the Trust Preferred Exchange Offer, KeyCorp will issue a number of its common shares equal to the quotient of $20.75 divided by the Average VWAP.

For each Trust Preferred Security of KeyCorp Capital X tendered on or prior to 11:59 p.m. on July 21, KeyCorp will issue a number of its common shares equal to the quotient of $22.50 divided by the Average VWAP. For every Trust Preferred Security of KeyCorp Capital X tendered after 11:59 p.m. on July 21, but prior to the expiration date of the offer, KeyCorp will issue a number of its common shares equal to the quotient of $21.25 divided by the Average VWAP.

The company will announce the Average VWAP and exchange ratios before the opening of NYSE trading on Monday, August 3.

Morgan Stanley (MS) is the sole arranger and lead manager for the Trust Preferred Exchange Offer, and Morgan Stanley, UBS Investment Bank (UBS), Citigroup (C) and Wells Fargo Securities (WFC) are acting as dealer managers.

KeyCorp, a bank-oriented financial service company, provides a wide range of products and services like commercial and retail banking, commercial leasing, investment management, consumer finance, as well as investment banking products to individual, corporate, and institutional clients throughout the U.S. and, for certain businesses, internationally.

Key is scheduled to release its 2Q09 earnings results on July 22, followed by a conference call later that day. Although the company has taken steps to reduce its exposure to the Commercial Real Estate (CRE) home builders segment, we anticipate higher losses in the CRE portfolio in the coming quarters.

Further, we expect elevated provision requirements combined with high overhead costs and weak net interest to put significant pressure on the company's profitability in the intermediate term.

As such, we maintain our Sell rating on the shares of KEY.

Read the full analyst report on "KEY"
Read the full analyst report on "C"
Read the full analyst report on "MS"
Read the full analyst report on "UBS"
Read the full analyst report on "WFC"
Zacks Investment Research

Top FBR Funds – Mutual Fund Education

Zacks Market Commentaries — Fri, 10 Jul 2009 06:50:15 +0000

FBR Large Cap Financial (FBRFX) was founded in December 1996. The investment seeks capital appreciation. It is non-diversified.

The fund normally invests at least 80% of its assets in securities of large capitalization companies that are "principally engaged" in the financial services sector and have a market capitalization of $3 billion or more.

J.P. Morgan Chase & Co. (JPM), KeyCorp (KEY) and Bank of America Corp. (BAC) are among the fund’s top holdings.

FBR Small Cap Financial (FBRSX) seeks long-term capital appreciation by investing primarily in the equity securities of small-cap domestic financial services companies.

The fund employs a consistent, fundamental, bottom-up investment process for selecting companies that meet the criteria necessary for inclusion in the portfolio. It focuses on financial services companies that invest in real estate, usually through mortgages and other consumer-related loans.

David Ellison has been lead manager at the fund since its inception in December 1996. The fund has topped the total returns of its benchmark index in the last 1-, 3-, and 5-year periods.

FBR Focus (FBRVX) seeks long-term capital appreciation by investing primarily in equity securities of small and mid-cap domestic companies.

The fund may invest up to 20% of its total assets in equity securities of companies with larger market capitalizations. As of January 2009, its portfolio turnover was 17%.

Unit holders need to make a minimum initial investment of $2,000 to enter this Zacks #1 Rank (“Strong Buy") fund. The fund distributes dividends and capital gains, if any, annually.

Zacks Investment Research

Stock Market News for July 8, 2009 – Market News

Zacks Market Commentaries — Wed, 08 Jul 2009 14:30:42 +0000

US stocks plunged Tuesday on lingering concerns about the prospects of an economic rebound and worries second-quarter earnings would fail to lift sentiments on the Street. Although the second quarter began on a high note with stocks surging to multi-month highs, the rally lost steam in mid-June as a slew of bleak economic data failed to provide a direction. Last week’s shaky unemployment report added to mounting worries and investors pressed the sell button. Crude prices fell to their lowest in seven weeks.

The Dow Jones industrial average closed at its lowest level since April 28, plunging 161 points, or 1.9%, to close at 8,163.60. Among DJIA components, only four managed to register gains yesterday. The S&P 500 index dropped below its 200-day moving average, losing 18 points or 2%, to close at its lowest point since May 1. The Nasdaq declined 41 points, or 2.3%, to close at 1,746.17, its lowest close since May 27. Declining shares outran advancing issues on the NYSE by a four-to-one margin as trading remained seasonally light.

All ten industry groups on the S&P 500 ended lower, with only defensive areas of consumer goods and healthcare recording declines of less than 2%. Oil and gas issues fell 2.6% and technology stocks declined 2.5% as a number of ratings upgrades were ignored by traders. Industrials led the decliners with a 3.2% fall on concerns that the recent rally has gone ahead of any economic recovery.

Alcoa (NYSE:AA), which reports its earnings after today’s close, tried to brush aside analyst worries, advising it was optimistic about its sales, as the Chinese economy and US automotive industry begin to recover. Barclays (NYSE:BCS) raised its price targets on Exxon Mobil (NYSE:XOM) and Murphy Oil (NYSE:MUR). Furthermore, traders will look toward this week's US and the International Energy Agency updates on demand forecasts, looking for indications of stabilization in their downward revisions.

According to Thomson Reuters (NYSE:TRI), analysts have lowered their second quarter earnings expectations to a 35.5% decline, inline with first quarter results. Basic material shares are expected to register a 79% earnings decline, versus a year ago, while energy companies are expected to report a 65% slide and financials a 53% drop.

Bank of America/Merrill (NYSE:BAC) also raised its ratings on a number of semiconductor shares, including Intel (NASDAQ:INTC), noting recent macro trends suggest a "definitive turn in end demand." But Gartner Inc predicted a 6% fall-off in information technology this year. Financial stocks, however, are expected to face turbulence as a cautious Deutsche Bank (NYSE:DB) report estimates credit pressures likely to result in losses at ten of the sixteen banks covered. The report also estimates losses for the second half of 2009 and much of 2010. KeyCorp (NYSE:KEY), Marshall and Ilsley (NYSE:MI), SunTrust (NYSE:STI) and Zion Bancorp (NASDAQ:ZION) may show the weakest results. However, Wells Fargo (NYSE:WFC) is expected to benefit from strength in its mortgage and trading operations; Meanwhile, KBW upgraded KeyCorp (NYSE:KEY) shares noting the bank has now exceeded Treasury requirements following its capital raising.

Today's calendar covers a G8 summit without Chinese President Hu Jintao who has rushed back home to attend to the Xinjiang crisis. Other items include the weekly MBA mortgage applications post, a 10.9% weekly gain, EIA Petroleum statistics, and consumer credit.

Zacks Investment Research

Fifth Third Sells Processing Unit – Analyst Blog

Zacks Market Commentaries — Wed, 01 Jul 2009 18:10:46 +0000

Fifth Third disposes majority stake in processing unit

On June 30, Fifth Third Bancorp (FITB) sold a 51% stake in its processing business to Advent International, the leading global buyout firm. The deal is valued at $2.35 billion, before any valuation adjustments.

The deal was announced in March this year. Fifth Third will retain the remaining 49% stake in the new company and will also keep its credit card issuing business, including retail credit card and commercial multi-card services.

We are encouraged with this transaction, as it will enable Fifth Third to focus more on its core business while boosting its Tier 1 common equity.

Fifth Third will realize a pre-tax gain of around $1.7 billion or $1.0 billion post-tax on the transaction. Approximately $1.2 billion will be contributed from this transaction to the bank's Tier 1 equity. The company has recently raised $1 billion of capital from its stock offering and completed the tender offer for its preferred shares. The company exchanged $696.2 million in its depository shares which represent 62.9% of the aggregate liquidation amount of its depositary shares. The transaction resulted in the issuance of approximately 60,121,124 shares of common stock and the payment of $229.8 million in cash.

Last week, Fitch Ratings downgraded the long-term issuer default rating of Fifth Third Bancorp and its subsidiary to "A-" from "A" with a negative outlook. Prior to that, Standard & Poor's lowered ratings of 18 banks, including Fifth Third, Wells Fargo & Co (WFC), Huntington Bancshares (HBAN), U.S. Bancorp (USB), KeyCorp (KEY) and Citizens Republic Bancorp (CRBC). Standard & Poor's reduced the bank's counterparty credit rating to "BBB" from "A-" with a negative outlook.

However, we are encouraged with the capital bolstering initiatives of Fifth Third and continue to view its shares a Hold, as we think that asset quality deterioration and the impact of a recessionary economy will restrict earnings in the coming quarters.
Read the full analyst report on "FITB"
Read the full analyst report on "WFC"
Read the full analyst report on "HBAN"
Read the full analyst report on "USB"
Read the full analyst report on "KEY"
Read the full analyst report on "CRBC"
Zacks Investment Research

Zacks Analyst Blog Highlights: Wells Fargo, U.S. Bancorp, BB&T, Fifth Third Bancorp and KeyCorp. – Press Releases

Zacks Market Commentaries — Fri, 19 Jun 2009 13:04:05 +0000

For Immediate Release

Chicago, IL - June 19, 2009 - Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Wells Fargo (WFC), U.S. Bancorp (USB), BB&T (BBT), Fifth Third Bancorp (FITB) and KeyCorp (KEY).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Thursday's Analyst Blog:

S&P Downgrades 18 Banks

Among the banks which were downgraded were Wells Fargo (WFC), U.S. Bancorp (USB), BB&T (BBT), Fifth Third Bancorp (FITB) and KeyCorp (KEY).

Yesterday President Obama unveiled his comprehensive regulatory revamp plan, which proposes to designate the Federal Reserve as the consolidated supervisor of large, systemically important institutions and also to require higher capital standards and greater oversight for all banks.

S&P also downgraded five smaller banks to junk status and still has negative outlooks on many U.S. banks, suggesting ratings could be downgraded further. The rating agency said that loan losses in the overall banking industry could increase beyond current expectations.

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About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517

About Zacks

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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Contact:
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312-265-9380
Visit: www.zacks.com

Zacks Investment Research

S&P Downgrades 18 Banks – Analyst Blog

Zacks Market Commentaries — Thu, 18 Jun 2009 14:37:42 +0000

Standard & Poor's Ratings Services has downgraded some of the largest banks in view of the Obama Administration's regulatory revamp plan, which will result in tighter regulation and lower profits for the industry.

Among the banks which were downgraded were Wells Fargo (WFC), U.S. Bancorp (USB), BB&T (BBT), Fifth Third Bancorp (FITB) and KeyCorp (KEY).

Yesterday President Obama unveiled his comprehensive regulatory revamp plan, which proposes to designate the Federal Reserve as the consolidated supervisor of large, systemically important institutions and also to require higher capital standards and greater oversight for all banks.

S&P also downgraded five smaller banks to junk status and still has negative outlooks on many U.S. banks, suggesting ratings could be downgraded further. The rating agency said that loan losses in the overall banking industry could increase beyond current expectations.

While the bigger banks, especially "too big to fail" ones, have benefited a lot from the various programs launched by the Federal Reserve, the Treasury and the FDIC, and are now in a much better shape, many smaller banks are still in a very weak financial state, and the FDIC's list of problem banks continues to grow.

The banks are now facing rapidly rising losses in the Commercial Real Estate
loans portfolio and Credit Cards portfolios, while the housing losses continue. Higher provisions and increased regulatory costs will eat into earnings in the coming quarters.
Read the full analyst report on "WFC"
Read the full analyst report on "USB"
Read the full analyst report on "BBT"
Read the full analyst report on "FITB"
Read the full analyst report on "KEY"
Zacks Investment Research

Zacks Industry Outlook Highlights: Wilmington Trust Corporation, KeyCorp, Zions Bancorp, Freddie Mac, and Sallie Mae. – Press Releases

Zacks Market Commentaries — Mon, 15 Jun 2009 13:48:13 +0000

For Immediate Release

Chicago, IL - June 15, 2009 - Zacks.com releases the latest Industry Outlook. Today's interview is with senior analyst Neena Mishra, who talks about the U.S. Banks Industry, including Wilmington Trust Corporation (WL), KeyCorp (KEY), Zions Bancorp (ZION), Freddie Mac (FRE) and Sallie Mae (SLM).

A synopsis of today's Industry Outlook is presented below. The full article can be read at http://at.zacks.com/?id=2678.

As a result of a rise in charge-offs, the levels of reserve coverage have fallen over the past quarters and the banks will have to make higher provisions in the coming quarters, affecting the profitability. Also, the banks will also continue to take mark-downs in the investment portfolios, further hurting the bottom-line.

Banks with high exposure to housing and Commercial Real Estate loans, like Wilmington Trust Corporation (WL), KeyCorp (KEY), Zions Bancorp (ZION) will remain under pressure. We also continue our Sell recommendations on Freddie Mac (FRE) and Sallie Mae (SLM), as we anticipate rising losses and increased provisions during FY09.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting: http://at.zacks.com/?id=2679.

About Zacks

The performance of the Zacks Rank portfolios shown above for annual and year-to-date periods are the linked monthly total returns (price changes + dividends) of equal weighted hypothetical portfolios, consisting of those stocks with the indicated Zacks Rank, assuming monthly rebalancing and zero transaction costs. These are not the returns of actual portfolios. The hypothetical portfolios were created at the beginning of each month from Jan 1988 forward based on the values of the Zacks Rank available to Zacks' clients before the beginning of each month.

The portfolios created monthly from 1988 through September 2006 exclude ADRS and are comprised of stocks that have the indicated Zacks Rank and were covered by at least two analysts at the time of the stocks inclusion in the portfolio. Starting in October 2006 and going forward, the portfolios are comprised of all stocks with the indicated Zacks Rank and do not exclude ADRs, which is more reflective of the list of stocks that customers will find on the Zacks web sites. 2007 returns are for the period of Jan 1 - Jun 30, 2007. These performance numbers have been audited from 1995 through 2003 by Autschuler Melovan, a division of American Express Financial.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

Zacks Investment Research

U.S. Banks – Industry Outlook

Zacks Market Commentaries — Mon, 15 Jun 2009 05:00:00 +0000

The worst of the credit crisis is now probably behind us, but the banking system is not yet out of the woods, as there are still many significant challenges ahead.

Ten of the nation's largest banks have received the Treasury approval for TARP repayment, as they are now able to tap the debt markets without FDIC's support and also access the equity markets as the investor confidence returns in the stronger banks.

While the bigger banks have benefited a lot from the various programs launched by the Federal Reserve, the Treasury and the FDIC, and are now in a much better shape, many smaller banks are still in a very weak financial state, and the FDIC's list of problem banks continues to grow. Further, government efforts have not succeeded in restoring the lending activity at the banks. Lower lending activity will continue to hurt the margins, though the low interest rate environment should be beneficial to the banks with a liability sensitive balance sheet.

For the last few quarters, the banks have mainly suffered due to the losses in the mortgages and Commercial Real Estate (residential construction loans). Housing prices have continued to decline, and given the sharp increase in the level of unemployment, we anticipate continued losses in these portfolios. Further, deterioration in other Commercial Real Estate loans is now rising at a rapid pace, and the downturn in this class is also likely to be very challenging.

With deterioration in the overall economic environment and rising job losses, we anticipate the losses will continue to increase in all the other asset classes as well, especially in the consumer related loans. It was recently reported that U.S. credit card delinquencies rose to a record high and are expected to rise further. We expect the asset quality deterioration to continue at least through the end of FY09.

OPPORTUNITIES

We recently upgraded our recommendation on Ocwen Financial Corp (OCN) to a Buy, as this company may be a major beneficiary of the President's Home Affordable Modification Plan, which provides incentives for loan modifications to the borrower, the investor and the servicer. OCN was appointed by Freddie Mac (FRE) as one of the servicers for the new pilot initiative launched to identify borrowers who are at a risk of foreclosure. Recently the Treasury extended TALF to include securities backed by servicing advances, which will provide comfort on the liquidity front.

WEAKNESSES

Banks with high exposure to housing and Commercial Real Estate loans, like Wilmington Trust Corporation (WL), KeyCorp (KEY), Zions Bancorp (ZION) will remain under pressure. We also continue our Sell recommendations on Freddie Mac and Sallie Mae (SLM), as we anticipate rising losses and increased provisions during FY09. Zacks Investment Research

U.S. Banks – Zacks Analyst Interviews

Zacks Market Commentaries — Mon, 15 Jun 2009 05:00:00 +0000

The worst of the credit crisis is now probably behind us, but the banking system is not yet out of the woods, as there are still many significant challenges ahead.

For the last few quarters, the banks have mainly suffered due to the losses in the mortgages and Commercial Real Estate (residential construction loans). Housing prices have continued to decline, and given the sharp increase in the level of unemployment, we anticipate continued losses in these portfolios. Further, deterioration in other Commercial Real Estate loans is now rising at a rapid pace, and the downturn in this class is also likely to be very challenging.

OPPORTUNITIES

WEAKNESSES

U.S. Banks – Industry Outlook

Zacks Market Commentaries — Fri, 12 Jun 2009 20:54:23 +0000

The worst of the credit crisis is now probably behind us, but the banking system is not yet out of the woods, as there are still many significant challenges ahead.

Ten of the nation's largest banks have received the Treasury approval for TARP repayment, as they are now able to tap the debt markets without FDIC's support and also access the equity markets as the investor confidence returns in the stronger banks.

While the bigger banks have benefited a lot from the various programs launched by the Federal Reserve, the Treasury and the FDIC, and are now in a much better shape, many smaller banks are still in a very weak financial state, and the FDIC's list of problem banks continues to grow. Further, government efforts have not succeeded in restoring the lending activity at the banks. Lower lending activity will continue to hurt the margins, though the low interest rate environment should be beneficial to the banks with a liability sensitive balance sheet.

For the last few quarters, the banks have mainly suffered due to the losses in the mortgages and Commercial Real Estate (residential construction loans). Housing prices have continued to decline, and given the sharp increase in the level of unemployment, we anticipate continued losses in these portfolios. Further, deterioration in other Commercial Real Estate loans is now rising at a rapid pace, and the downturn in this class is also likely to be very challenging.

With deterioration in the overall economic environment and rising job losses, we anticipate the losses will continue to increase in all the other asset classes as well, especially in the consumer related loans. It was recently reported that U.S. credit card delinquencies rose to a record high and are expected to rise further. We expect the asset quality deterioration to continue at least through the end of FY09.

As a result of a rise in charge-offs, the levels of reserve coverage have fallen over the past quarters and the banks will have to make higher provisions in the coming quarters, affecting the profitability. Also, the banks will also continue to take mark-downs in the investment portfolios, further hurting the bottom-line.

OPPORTUNITIES

We recently upgraded our recommendation on Ocwen Financial Corp (OCN) to a Buy, as this company may be a major beneficiary of the President's Home Affordable Modification Plan, which provides incentives for loan modifications to the borrower, the investor and the servicer. OCN was appointed by Freddie Mac (FRE) as one of the servicers for the new pilot initiative launched to identify borrowers who are at a risk of foreclosure. Recently the Treasury extended TALF to include securities backed by servicing advances, which will provide comfort on the liquidity front.

WEAKNESSES

Banks with high exposure to housing and Commercial Real Estate loans, like Wilmington Trust Corporation (WL), KeyCorp (KEY), Zions Bancorp (ZION) will remain under pressure. We also continue our Sell recommendations on Freddie Mac (FRE) and Sallie Mae (SLM), as we anticipate rising losses and increased provisions during FY09.

Zacks Investment Research

Call Speculators Converge on KeyCorp (KEY) – Options Commentary

Zacks Market Commentaries — Tue, 09 Jun 2009 05:00:00 +0000

Using the Zacks Unusually High Option Volume screener Ohio-based banking bigwig KeyCorp (KEY) caught my eye.

Before we begin, let's explain the contrarian stance that makes Schaeffer's so unique. When searching for a bullish pick, we like to see heavy skepticism toward an outperforming stock, as this leaves ample room for upgrades or other positive catalysts to fuel the stock higher. When searching for a bearish pick, on the other hand, contrarians are looking for significant bullish sentiment toward an underperforming stock, as we believe an excess of optimism is a sign that everyone has already bought into the stock and sideline money is virtually tapped out.
However, keep in mind that some optimism and pessimism is genuinely warranted and isn't always a contrarian indicator - like an outperforming stock with many "buy" ratings or an underperforming stock with a plethora of "sell" ratings.

Brokerage firm RBC Capital on Thursday opined that financial stocks are at the beginning of a new, multi-year bull market, Dow Jones reported. As a result, analysts upped their rating on the banking sector to "overweight" from "sector perform," and predicted a rise in banks' revenue and earnings due to wider net interest margins and reduced credit costs. Furthermore, RBC singled out KEY, upgrading the stock to "top pick" from "sector perform."

In light of the bullish comments, call volume catapulted higher on KEY. According to the Zacks filter, the equity saw more than 24,000 calls change hands Thursday, tripling its average daily volume of fewer than 8,000 contracts. The stock's Jun 5 call was most active, with 9,350 contracts crossing the tape.

However, the option's popularity is nothing new; during the past couple of weeks, Jun 5 call open interest has swelled by more than 21,000 contracts. In fact, the at-the-money 5 strike is now home to peak call open interest in the front-month series, with more than 25,100 contracts in residence.

In Friday's trading, it appeared that the optimists in the options arena set the bar even higher for KEY. The security's Jun 6 call was most active, with more than 3,500 contracts changing hands. The near-the-money 6 strike is currently home to almost 8,000 call contracts in the June series of options, and harbors 5,100 open call positions in the July series - the highest in the back-month series.

The escalating optimism among near-term traders is further evident in KEY's Schaeffer's put/call open interest ratio, which measures options slated to expire within 3 months. The stock's SOIR currently rests at 0.98, in the 30th annual percentile, implying that short-term speculators have been more bullishly biased toward the equity less than a third of the time during the past year.

So, are the high hopes among options players warranted? Let's examine the stock from a technical perspective.

While the broader S&P 500 Index (SPX) has rallied almost 4% since the start of 2009, shares of KEY have surrendered about 35% year-to-date. Further demonstrating the stock's status as a market weakling of late, KEY has underperformed the broader SPX by 22% during the past 40 trading sessions.

Nevertheless, the equity has staged a decent rebound since the start of June, advancing about 23% to hang out in the $5.40 neighborhood. What's more, KEY is poised to close its second consecutive session atop double-barreled resistance at its 10-day and 20-day moving averages - a feat not accomplished since mid-April.

From a longer-term perspective, though, the charts aren't as encouraging. Since skimming the $40 level in February 2007, the stock has backpedaled more than 86%. And though some may argue that shares of KEY look cheap at the moment, any rally attempts could face a roadblock in the form of the stock's descending 32-week moving average, which has smacked the security lower on several occasions during the past couple of years.

In conclusion, while the confidence among call speculators continues to grow, shares of KEY may still have some technical hurdles to overcome before proving that their recent rebound has legs. If the stock fails to conquer the potential challenges on the charts, the escalating optimism could subside. Should the bulls in the options arena remove their rose-colored glasses en masse, an unwinding of optimism could act as an additional catalyst to the downside.

Zacks Investment Research

Stock Market News for June 5, 2009 – Market News

Zacks Market Commentaries — Fri, 05 Jun 2009 14:27:45 +0000

U.S. stocks rose for the fifth time in six days as analysts recommended buying bank stocks and oil prices rose again pushing energy stocks higher. Investors also took heart from the drop in unemployment numbers and U.S. workers filing first-time claim for jobless benefits. The Dow Jones industrial average added 75 points, or 0.9% to close at 8750 and the S&P 500 index rose 1.1% to close at 942.46. The S&P is up 39% since hitting its 12-year low on March 9. The tech-heavy Nasdaq continued its strong performance and rose 1.3%.

Among S&P industry groups, financials were the leading gainers, rising 3.4% as traders took reports of a failed Latvian bond auction in their stride. A Bernstein upgrade of Goldman Sachs (NYSE:GS) to "outperform" also helped financials and the effects of the failed bond auction were nowhere to be seen. Bernstein suggested Goldman's capital strength will allow the firm to consolidate its position further in fixed income, currency and commodity markets. Fifth Third Bancorp (NASDAQ:FITB), which has been asked by regulators to raise $1.1 billion as part of the stress tests, reported sale of $1 billion common shares and said it is on track to raise the required amount. Keycorp (NYSE:KEY) jumped 20% after RBC Capital Markets cited the stock a "top pick." Today's reports suggesting the FDIC is pushing for an executive shuffle at Citigroup (NYSE:C) may imperil CEO Pandit's tenure, and provide another reason for firms to shun government funds and rush to pay back TARP monies.

Basic material shares continued their advance, rising 2.1%, with Alcoa (NYSE:AA), up 6.2%, leading the list of gainers on the DJIA. Improved demand scenario, especially from China, helped the advance in Alcoa shares. Oil and gas sector shares gained 2.1%. Among stocks from the sector, Chevron (NYSE:XOM) and Exxon Mobil (NYSE:CVX) led the gainers as crude prices surged 4.1% to $68.81, a seven-month closing high. Bullish analysts at Goldman Sachs (NYSE:GS) upped their forecasts for crude to $85 per barrel in 2009 and $95 in 2010.

Technology stocks advanced 1.5%, helped by prospects for new product launches and analyst upgrades. Apple (NASDAQ:AAPL) rose after the iPhone-maker's profit and share-price target was increased by Oppenheimer. Some reports suggested CEO Steve Jobs was expected to return from his medical leave by month's end. Citi (NYSE:C) raised Google (NASDAQ:GOOG) price target to $580 from $450, on expectations that second quarter results will meet estimates and the company will report better results next year. Advanced Micro Devices (NYSE:AMD) said the company expects fourth quarter sales to improve from a year ago, helped by better economic conditions. Intel (NASDAQ:INTC) announced plans to purchase Wind River Systems (NASDAQ:WIND) for an all-cash deal valued at $884 million.

Dismal retail sales numbers in May, with an estimated 75% of retailers falling short of targets, posting an estimated 8.6% average drop in same-store-sales, however, could not check the rally. Costco (NASDAQ:COST) reported a 7% drop, versus estimates of a 6.4% decline; Target (NYSE:TGT) comparable-sales fell 6.1% versus expectations of a 4.3% drop; Saks (NYSE:SKS) disappointed with a 26.6% sales fall versus an anticipated 14% drop; Macy's (NYSE:M), however, was slightly ahead of expectations with its 9.1% decline, less than the 9.3% anticipated.

Zacks Investment Research

Financial Sector Play: Large vs. Regional Banks

Bullish Bankers — Fri, 15 May 2009 11:00:58 +0000

One trade I have been extremely bullish on is a long position on the KBW Bank Index [KBE: 18.71, 0.00 (0.00%)] while shorting the KBW Regional Bank Index [KRE: 21.09, 0.00 (0.00%)]. This trade has worked out very well ever since I wrote on RealMoney’s Columnist Conversation with the trade. The play is betting on [...]

Big Surge in Secondary Stock Offerings Will Lead to a Major Uptick in IPO Profit Plays

William Patalon lll — Wed, 13 May 2009 10:00:08 +0000

By William Patalon III Executive Editor Money Morning/The Money Map Report In an odd bit of capitalist irony, the U.S. banking crisis could end up as the catalyst that finally jump-starts the... Money Morning is here to help investors profit h...

Stock Market News for May 12, 2009 – Market News

Zacks Market Commentaries — Tue, 12 May 2009 14:03:23 +0000

Wall Street turned lower Monday after some financial firms said they plan to sell shares to repay bailout money. A whiff of caution was in the air as investors took to profit taking and put the money into safe-haven arenas. Treasury prices advanced, with the price of the 10-year up 1 2/32; the dollar gained 0.4% against a basket of currencies, and the Vix volatility index jumped 2.6%.

The Dow Jones Industrial Average witnessed its steepest fall in three weeks, shedding 156 points, or 1.8% and the broader S&P 500 index declined 20 points, or 2.1%. Volume on the NYSE was a moderate 1.49 billion shares. Sentiment was negative as declining stocks beat advancing issues by a seven-to-three margin.

On Monday, U.S. Bancorp (NYSE:USB), Capital One Financial Corp. (NYSE:COF), KeyCorp (NYSE:KEY), Principal Financial Group Inc. (NYSE:PFG) and BB&T Corp. (NYSE:BBT) announced plans to sell stock. BB&T (NYSE:BBT) also announced plans to reduce its dividend. Bank of America (NYSE:BAC) had also announced Friday to sell 1.25 billion shares.

American Express (NYSE:AXP) declined 8.3% to $26.04 and JPMorgan Chase & Co. (NYSE:JPM), which does not need fresh capital infusion, dropped 8% to $35.83. Goldman Sachs (NYSE:GS), JP Morgan (NYSE:JPM) and American Express (NYSE:AXP) announced plans to repay TARP funds through new share issuances. The firms, though, do not need to address stress-test needs with additional capital cushions. Capital One (NYSE:COF) declined 14% to $27.10 and U.S. Bancorp (NYSE:USB) lost 9.9% to $18.50. BB&T (NYSE:BBT) dropped 7.6% to $24.34.

Nevertheless, financial firms were not the only ones needing to raise cash. Automaker Ford (NYSE:F) announced its intent to offer 300 million common shares in a public offering due to price after today's close. The company hopes to raise $1.7 billion to $2 billion through the offering. Anadarko Petroleum (NYSE:APC) also announced plans to sell 30 million new shares while Microsoft (NASDAQ:MSFT), for the first time in its history, sold $3.75 billion in bonds Monday, proceeds from which will be used to buy back its shares. Bank of America (NYSE:BAC) said it will sell its China Construction stake for $7.3 billion. CEO Lewis also cited "business is really good" at its Merrill Lynch unit, adding the company would like to repay the US government's investment in the firm in "months, not years."

General Motors (NYSE:GM) declined 11% after CEO Fritz Henderson said a bankruptcy filing is probable. Microsoft Corp. (NASDAQ:MSFT), for the first time in its history, announced plans to sell $3.75 billion of bonds.

Among DJIA's thirty components, only five moved higher yesterday: International Business Machines (NYSE:IBM) rose 1.4%, Hewlett-Packard (NYSE:HPQ) and Wal-Mart (NYSE:WMT) added 1.0% each, Intel (NASDAQ:INTC) edged up 0.5%, and AT&T (NYSE:T) added 0.4%. Positive comments from German software maker SAP and a ratings upgrade from a Citigroup (NYSE:C) analyst helped technology stocks buck the trend of decliners, with a 0.1% gain. Citigroup (NYSE:C) upgraded the software and services sector to "overweight" from "market weight," but cut chips and chip equipment stocks to "market weight" from "overweight."

Fed Chairman Bernanke's comments last night at the annual Fed conference were notably optimistic. Bernanke noted banks are "well ahead" on feathering their capital nests with private sector funding. On the stress tests, he noted, "If it helps reduce uncertainty among investors regarding future losses and capital needs, and thereby improves the banking system's access to private capital, one of the key objectives of the program will have been achieved." Bernanke noted risks of deflation are "receding," an inflation rate at 1.5-2% is "appropriate," and said he remains "certain" the greenback will remain the world's reserve currency.

March trade balance figures are expected to post at a negative $29.2 billion, up from a negative $26.0 billion prior. The Treasury budget for April is expected to swing from $159.3 billion to a negative $63.0 billion. Among key speeches are the Fed's Rosengren on risk management, and Treasury Secretary Geithner at a Social Security news conference.

Zacks Investment Research

Earnings Trends Highlights: American International Group, CONSOL Energy, Peabody Energy, Regions Financial, SunTrust and KeyCorp. – Press Releases

Dirk Van Dijk — Tue, 12 May 2009 11:15:00 +0000

For Immediate Release

Chicago, IL - May 12, 2009 - Zacks Research Director, Dirk Van Dijk says that S&P 500 earnings are continuing to show red ink. He tracks companies on the Zacks.com web site, naming names, while forecasting trends for the months ahead.

Key Points from Van Dijk's Latest Earnings Assessment

Earnings season is almost over with 88.4% of reports in
Total reported net income is down 32.0% from year ago, but up 86.8% from Q4
Financials are much better than expected, but the quality of earnings is awful
Ex-Financials, total earnings are down 36.4% from a year ago and down 20.1% from Q4
Total net income is down in all sectors but Financials and Health Care
Health Care, Tech and Discretionary all showing lots of positive surprises
Full S&P total net income expected to be 31.9% lower than Q1 2008
Decline expected to continue in Q2, with a 31.9% year-over-year
Total net income expected to fall 15.7% for all of 2009, after 18.9% fall in 2008
Revisions Ratios improve into Neutral Territory
Bottom-up estimate for S&P 500 now $57.43 in 2009 versus $57.76 last week.

Total Net Income Growth

With earnings season almost over, it looks like the Financial sector will actually post the best year-over-year growth in total net income of any sector. However, the quality of those earnings is exceedingly poor. By and large, the analysts have not been all that impressed, since they continue to cut their full year earnings estimates for stocks in the sector by a greater ratio, relative to increases than in any other sector. Still, it looks like Financials will take the gold for the quarter, even if 3.1% growth would normally be nothing to write home about, especially if it was largely done with smoke and mirrors.

Health Care and Utilities both look to be essentially unchanged relative to a year ago, and every other sector is facing significant declines in total net income, ranging from an 8.3% drop among the Consumer Staples, to a plunge into red ink from the black among the Consumer Discretionary names that have been reported. However, the Consumer sectors are the ones with the most firms still to report, so there is still time for them to change their rankings. (Given the expectations for the late reporters, that seems unlikely.)

All told, 442 firms (88.4%) have reported total net income of $110.4 billion, a sharp drop from the $162.4 billion those same firms reported a year ago. It is however, a very sharp improvement from the $59.1 billion they collectively earned in the fourth quarter.

A green shoot? Perhaps, but more than all of the sequential improvement is due to the Financial sector, most notably a much smaller loss in the first quarter for American International Group (AIG) than in the fourth quarter.

If we strip out the Financials, which to my mind are clearly a special case, then the 365 non-Financial firms have collectively earned a total of $91.7 billion, down 36.4% from a year ago and down 20.1% from the fourth quarter. Just because it is a green shoot, does not mean that it is not a weed.

Looking at the full year expectations, every sector is expected to post lower total net income in 2009 than in 2008, with the exception of the Financials. That sector, which collectively lost money last year, is expected to be back in the black this year.

All told, total net income is expected to fall 15.7% in 2009, coming on the heels of an 18.9% decline last year. This does, however, imply a bit of a second half recovery.

With a drop of 31.9% expected when all is said and done for the first quarter, and a 35.7% drop for the second quarter, growth would have to turn positive in the second half to get to down "just 15.7%. I suspect most of the earnings growth will be in the fourth quarter, due to extremely easy comparisons. After all in the fourth quarter of 2008, earnings were down 61.8% from the fourth quarter of 2007.

Scorecard and Median EPS Growth Rates

Surprise Ratio at 2.03 (below normal); median surprise at 4.17% (above normal)
Median EPS decline reported so far is 17.3%
Every sector but Telecom and Health Care is down so far among the reported firms
Materials, Energy and Financials post biggest declines in median EPS growth
Only Staples and Discretionary have large numbers of firms yet to report
Positive surprises concentrated in the Discretionary, Health Care and Tech Sectors
Full year 2008 EPS expected to be down 10.0% among reported firms

Median EPS year-over-year growth paints a somewhat different picture than does total net income growth. The overall quarterly declines reported are significantly smaller, at 17.3%. the rankings of the sectors are different, most notably in the case of the Financials where instead of leading, it is near the back of the pack with a 35.0% decline.

Overall we are seeing more than twice as many positive surprises as disappointments, but surprises leading disappointments is normal. Firms learned long ago that it is better to under promise and over deliver.

The size of the median surprise is bigger than normal at 4.17%, however. That does seem to be a legitimate green shoot.

Overall, Tech has the best looking surprise profile, with a ratio of positive surprises to disappointments of 4.55:1 and a median surprise of 8.6%. Consumer Discretionary also looks good with a surprise ratio of 2.57:1 and a huge median surprise of 10.8%. The Financials are the only sector with more disappointments than positive surprises.

The Zacks Revisions Ratio: 2009[2]

Revisions ratio for full S&P 500 up to 0.85, from 0.65 last week
One month ago, the ratio was 0.32; the improvement has been steady and strong
Five sectors in positive territory, Telecom and Tech lead
Now into Neutral territory for the S&P 500 as a whole
Energy and Financials continue to see estimates cut
Ratio of firms with rising to falling mean estimates rises to 0.72 from 0.51
Total number of revisions (4-week total) up to 4,046 from 3,161 last week (28.3%)
Increases up to 1,858 from 1,246 (49.1%); cuts up to 2,198 from 1,915 (12.7%)
Total Revisions activity will peak in next few weeks

While we are still seeing more estimate cuts than increases, the ratio has improved dramatically over the past month. This has been happening on a far larger total number of revisions.

A month ago, there were only 480 increases (four week moving total) and 1,500 cuts for a ratio of 0.32. Since then the number of estimate increases as almost quadrupled to 1,858, while the number of cuts has risen by only 46.5%, resulting in a ratio of 0.85.

I see this as a very significant "glimmer of hope". Half of the sectors are now, not just above 1.0, but into true positive territory.

Telecom is extremely strong, with almost four increases for every cut. It however is a very small sector. Perhaps more significant is the very strong showing among the Tech firms with a ratio of 1.75.

Better-than-expected first-quarter earnings are leading to positive estimate revisions. This is not only true for the S&P 500 as a whole but at the sector level as well. Just compare the positive surprises versus disappointments in the table above with where the sectors are on the Revisions ratio rankings.

Not all sectors are doing well however. The analysts continue to slash their estimates for the Financials. It is obvious that the analysts were not impressed by the earnings among the Financials. Too be fair, there is a bit of a mixed picture among the banks, with some like Regions Financial (RF) doing quite well with 11 increases and only 3 cuts (mean estimate up 26.3%), while seemingly similar firms like SunTrust (STI) and KeyCorp (KEY) are still seeing analysts slash away (15 and 14 cuts respectively, no increases at either and declines of more than 100%)

Also, despite a rally in the price of oil (now almost $58) analysts continue to cut their estimates for the Energy sector. However, some of the biggest cuts in the Energy sector are coming from the Coal firms like CONSOL Energy (CNX) and Peabody Energy (BTU).

The Zacks Revisions Ratio: 2010

Overall picture for 2010 similar to that of 2009
Revisions ratio up to 0.71 from 0.59
Telecom and Tech the strongest, Financials the weakest for 2010
Positive surprises leading to more upward revisions
Ratio of rising to falling mean estimates rises to 0.54 from 0.50
Total revisions activity should peak in a few weeks
Total number of revisions rises to 2,996 from 1,755 (70.7%)
Estimate increases rise to 1243 from 577 (115.5%), cuts rise to 1,753 from 1,200 (46.1%)

The overall picture for 2010 is similar in outline to that of 2009, but not quite as good, with the revisions ratio rising to 0.71 from 0.59 last week and 0.30 a month ago. Telecom and Tech also lead for 2010, while Financials, Energy and Industrials are continuing to get cut. The Utilities are much weaker for 2010 than they are for 2009. The rise in the total number of estimates has been even more dramatic for 2010 than for 2009, with the number of increases more than doubling in the last week alone.

Earnings Shares and P/Es

P/Es are too low since earnings estimates are too high
Earnings Shares, including historical, based on current make up of S&P 500
Health Care expected to take Earnings crown from Energy in 2009, keep it in 2010
Energy Earnings Share expected to plunge to 11.8% from 23.6%
Financials 2009 earnings share expected to rise to 10.2% from -1.7% in 2008.
Consumer Discretionary market cap share far above earnings shares (overvalued?)
Health Care Market Cap share well below earnings shares (undervalued?)
12-month forward S&P P/E of 14.48 equates to earnings yield of 6.91%, which is very attractive relative to 10-year T-note yield of 3.33%, but only mediocre relative to 5.38% A-rated 10 year corporate.
T-note rates are rising and more realistic earnings yields of near 5.51% based on lower earnings ($55) means the spread, while still attractive, is not overwhelming.

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About the Zacks Rank

Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988, #1 Rank Stocks have generated an average annual return of +28%. During the 2000-2002 bear market, Zacks #1 Rank stocks gained +43.8%, while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have underperformed the S&P 500 by 82% annually (+2% versus +10%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.

Zacks "Profit from the Pros" e-mail newsletter offers continuous coverage of the industries and the stocks poised to outperform the market. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=5186.]

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Len Zacks. The company continually processes stock reports issued by 3,000 analysts from 150 brokerage firms. It monitors more than 200,000 earnings estimates, looking for changes.

Then, when changes are discovered, they're applied to help assign more than 4,400 stocks into five Zacks Rank categories: #1 Strong Buy, #2 Buy, #3 Hold, #4 Sell, and #5 Strong Sell. This proprietary stock-picking system continues to outperform the market by a nearly 3-to-1 margin.

The best way to unlock profitable Zacks' stock recommendations and market insights is through the free daily email newsletter: "Profit from the Pros." It provides a steady flow of profitable ideas GUARANTEED to be worth your time. Register for your free subscription to Profit from the Pros by going to http://at.zacks.com/?id=5187.

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Contact: Dirk Van Dijk, CFA
Company: Zacks.com
Phone: 312-265-9211
Email: pr@zacks.com
Visit: www.Zacks.com

Zacks Investment Research

Monday’s Market Recap (05/11/09)

Bullish Bankers — Tue, 12 May 2009 02:09:06 +0000

The markets started the week off with a poor first day, as the S&P fell 2.15%. The NASDAQ and Dow Jones also were down, falling 0.45% and 1.82% respectively. Futures for June gold fell today, settling at $913.50, with crude prices also falling, to settle the day at $58.50. The price on the 10-year saw [...]

BBT, Capital One, U.S. Bancorp and KeyCorp Planning Stock Sales to Raise Capital, Repay TARP

Contrarian Profits — Mon, 11 May 2009 16:30:22 +0000

pOne business day removed from the government’s bank stress tests, four of the largest U.S. banks - BB#38;T Corp. (NYSE: a href="http://www.google.com/finance?q=NYSE%3ABBT"BBT/a), Capital One Financial Corp. (NYSE: a href="http://www.google.com/finance?q=NYSE%3ACOF"COF/a), U.S. Bancorp (NYSE: a href="http://www.google.com/finance?q=NYSE%3AUSB"USB/a) and KeyCorp (NYSE: a href="http://www.google.com/finance?q=key+corp" target="_blank"KEY/a) - announced plans to raise capital through stock offerings. /p pBB#38;T said it plans to raise $1.5 billion by selling common stock, combine it with #8220;other funds,#8221; and repay all the capital from the U.S. Department of the Treasury’s Troubled Asset Relief Program (TARP)./p pThe Winston-Salem, N.C. bank also said it will a href="http://bbt.mediaroom.com/index.php?s=43#38;item=744"cut its divided 68% to 15 cents a share/a, an action that will save $725 million in capital a year. Chief Executive Officer Kelly King said the dividend reduction is temporary, and making the decision#8230;/p

Number of Postive Revisions Rises Dramatically – Earnings Trends

Dirk Van Dijk — Mon, 11 May 2009 05:00:00 +0000

Highlighted stocks include: American International Group (AIG), CONSOL Energy (CNX), Peabody Energy (BTU),, Regions Financial (RF), SunTrust (STI) and KeyCorp (KEY). Key Points:

Earnings season is almost over with 88.4% of reports in
Total reported net income is down 32.0% from year ago, but up 86.8% from Q4
Financials are much better than expected, but the quality of earnings is awful
Ex-Financials, total earnings are down 36.4% from a year ago and down 20.1% from Q4
Total net income is down in all sectors but Financials and Health Care
Health Care, Tech and Discretionary all showing lots of positive surprises
Full S&P total net income expected to be 31.9% lower than Q1 2008
Decline expected to continue in Q2, with a 31.9% year-over-year
Total net income expected to fall 15.7% for all of 2009, after 18.9% fall in 2008
Revisions Ratios improve into Neutral Territory
Bottom-up estimate for S&P 500 now $57.43 in 2009 versus $57.76 last week.

Total Net Income Growth

All told, total net income is expected to fall 15.7% in 2009, coming on the heels of an 18.9% decline last year. This does, however, imply a bit of a second half recovery.

Total Net Income Growth (Reported)
Sector	Q3 '08 A	Q4 '08 A	Q1 '09 A	Q2 '09 E	2007 A	2008 A	2009 E	2010 E
Financials	-89.23%	-944.28%	3.13%	-45.30%	-18.10%	-106.40%	-607.50%	74.82%
Health Care	7.10%	8.68%	0.41%	-3.56%	20.12%	11.89%	-2.33%	10.16%
Utilities	-6.86%	-0.62%	-0.46%	-5.87%	11.02%	2.93%	-1.14%	8.65%
Cons. Stap.	12.69%	-0.31%	-8.26%	1.85%	6.75%	13.87%	-3.35%	9.63%
Telecom	-16.04%	-16.53%	-18.74%	-25.28%	18.65%	-4.56%	-19.48%	5.49%
Technology	9.16%	-22.42%	-31.06%	-31.10%	12.00%	17.87%	-21.75%	21.56%
Industrials	-0.19%	-20.21%	-36.87%	-39.93%	13.60%	0.06%	-30.18%	7.15%
Energy	57.20%	-26.10%	-61.38%	-65.95%	8.54%	21.62%	-58.00%	36.56%
Materials	2.20%	-81.98%	-74.07%	-72.83%	10.21%	-9.90%	-63.01%	86.09%
Cons. Disc.	-61.44%	-122.62%	-129.66%	-59.00%	-4.52%	-70.38%	-22.93%	282.15%
S&P	-12.29%	-62.37%	-32.01%	-36.81%	2.64%	-20.31%	-16.77%	28.16%

Total Net Income (Reported)
Sector	Q1 '09	Q1 '08	Q4 '08	Q4 '07
Health Care	$24,972	$24,871	$24,997	$23,000
Financials	$18,661	$18,094	-$55,758	$6,604
Technology	$14,945	$21,680	$20,692	$26,673
Industrials	$13,747	$14,984	$15,348	$15,396
Cons. Stap.	$13,163	$34,086	$24,840	$33,615
Telecom	$12,573	$19,915	$18,597	$23,308
Energy	$6,843	$6,874	$5,502	$5,536
Cons. Disc.	$5,588	$6,876	$6,105	$7,314
Materials	$2,041	$7,870	$1,025	$5,690
Utilities	-$2,118	$7,139	-$2,245	$9,923
S&P	$110,416	$162,390	$59,103	$157,058

Total Net Income Growth (Not Reported)
Sector	Q3 '08 A	Q4 '08 A	Q1 '09 E	Q2 '09 E	2007 A	2008 A	2009 E	2010 E
Health Care	6.29%	3.73%	12.70%	-6.74%	9.27%	9.76%	7.76%	10.91%
Industrials	28.80%	-2.66%	10.57%	-49.33%	28.05%	33.86%	-23.72%	-6.04%
Telecom	-11.67%	-19.85%	-18.22%	-17.80%	-2.94%	4.70%	-12.21%	1.10%
Cons. Stap.	16.32%	8.84%	-19.62%	5.36%	8.91%	20.90%	1.98%	9.18%
Technology	-1.51%	2.16%	-31.55%	-23.81%	7.73%	27.37%	-21.22%	17.33%
Utilities	11.36%	-0.77%	-33.48%	46.30%	7.34%	2.59%	-14.19%	13.42%
Energy	66.62%	-23.62%	-48.36%	-53.42%	43.05%	35.45%	-34.27%	-25.53%
Cons. Disc.	-13.71%	-159.91%	-52.79%	-50.90%	12.50%	-32.45%	-7.64%	15.61%
Financials	-195.12%	327.10%	-170.90%	-22.88%	-36.30%	-219.74%	-178.76%	17.88%
0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
S&P	-3.39%	-56.31%	-30.76%	-24.75%	9.23%	-2.49%	-5.33%	12.16%

Total Net Income Growth (Combined)
Sector	Q3 '08 A	Q4 '08 A	Q1 '09 E	Q2 '09 E	2007 A	2008 A	2009 E	2010 E
Financials	-90.09%	-992.86%	6.92%	-44.95%	-18.27%	-107.22%	-556.48%	73.66%
Health Care	7.07%	8.51%	0.82%	-3.69%	19.69%	11.81%	-1.97%	10.19%
Utilities	-5.72%	-0.63%	-2.98%	-2.78%	10.76%	2.91%	-2.03%	8.94%
Cons. Stap.	13.38%	1.54%	-11.26%	2.61%	7.20%	15.35%	-2.17%	9.53%
Telecom	-15.97%	-16.59%	-18.73%	-25.16%	18.24%	-4.42%	-19.35%	5.41%
Technology	7.46%	-18.88%	-31.15%	-29.84%	11.30%	19.37%	-21.66%	20.85%
Industrials	0.64%	-19.77%	-35.56%	-40.32%	13.93%	0.94%	-29.96%	6.65%
Energy	57.26%	-26.09%	-61.29%	-65.86%	8.70%	21.71%	-57.84%	35.92%
Materials	2.20%	-81.98%	-74.07%	-72.83%	10.21%	-9.90%	-63.01%	86.09%
Cons. Disc.	-42.26%	-135.40%	-90.10%	-53.30%	1.37%	-55.80%	-13.95%	114.14%
S&P	-11.56%	-61.83%	-31.87%	-35.69%	3.14%	-18.87%	-15.66%	26.42%

Scorecard and Median EPS Growth Rates

Surprise Ratio at 2.03 (below normal); median surprise at 4.17% (above normal)
Median EPS decline reported so far is 17.3%
Every sector but Telecom and Health Care is down so far among the reported firms
Materials, Energy and Financials post biggest declines in median EPS growth
Only Staples and Discretionary have large numbers of firms yet to report
Positive surprises concentrated in the Discretionary, Health Care and Tech Sectors
Full year 2008 EPS expected to be down 10.0% among reported firms

The size of the median surprise is bigger than normal at 4.17%, however. That does seem to be a legitimate green shoot.

First-Quarter Scorecard (Reported)
Sector	1Q '09 (A)	2Q '09 (A)	2008 (A)	2009 (E)	2010 (E)	% Reported	Median % Surprise	# Pos Surprise	# Neg Surprise	# Match
Healthcare	5.66%	3.03%	13.08%	5.37%	11.32%	94.44%	3.77%	37	10	4
Telecom	0.98%	-7.99%	4.04%	-4.33%	6.40%	88.89%	6.39%	6	2	0
Cons. Stap.	0.00%	-4.58%	10.65%	0.42%	9.41%	78.05%	2.16%	17	9	6
Utilities	-3.51%	-3.06%	3.99%	-0.14%	7.30%	97.06%	6.17%	20	12	1
Cons. Disc.	-25.57%	-22.08%	-7.69%	-15.16%	10.36%	75.95%	10.79%	41	16	3
Industrial	-29.33%	-24.31%	11.83%	-18.75%	10.25%	93.22%	2.44%	32	20	3
Tech	-33.33%	-32.24%	15.93%	-23.31%	12.38%	80.00%	8.60%	41	9	10
Financial	-35.00%	-38.46%	-21.20%	-16.56%	7.19%	95.06%	-1.28%	36	39	2
Energy	-41.67%	-58.06%	21.29%	-52.68%	13.67%	97.44%	4.49%	25	10	3
Materials	-56.28%	-45.81%	-4.76%	-39.00%	13.70%	96.55%	8.62%	19	6	3
S&P 500	-17.31%	-18.87%	6.70%	-10.03%	10.26%	88.40%	4.17%	274	133	35

First-Quarter EPS Growth (Not Reported)
Sector	1Q '09 (E)	2Q '09 (E)	2008 (A)	2009 (E)	2010 (E)
Utilities	31.46%	-7.59%	5.23%	0.43%	13.24%
Healthcare	2.56%	7.50%	9.05%	7.88%	10.82%
Materials	0.00%	0.00%	0.00%	0.00%	0.00%
Cons. Stap.	-5.52%	2.60%	9.88%	8.27%	9.19%
Tech	-7.69%	-2.44%	21.05%	19.15%	13.39%
Industrial	-14.75%	-7.50%	30.03%	62.67%	-6.80%
Telecom	-18.52%	-8.33%	-2.94%	3.03%	1.70%
Financial	-23.78%	55.95%	-73.84%	-705.20%	42.33%
Cons. Disc.	-25.35%	-21.21%	7.76%	-13.93%	13.56%
Energy	-51.28%	-42.86%	43.06%	27.18%	-25.53%
S&P 500	-18.52%	-6.86%	10.10%	3.79%	11.14%

The Zacks Revisions Ratio: 2009[2]

Revisions ratio for full S&P 500 up to 0.85, from 0.65 last week
One month ago, the ratio was 0.32; the improvement has been steady and strong
Five sectors in positive territory, Telecom and Tech lead
Now into Neutral territory for the S&P 500 as a whole
Energy and Financials continue to see estimates cut
Ratio of firms with rising to falling mean estimates rises to 0.72 from 0.51
Total number of revisions (4-week total) up to 4,046 from 3,161 last week (28.3%)
Increases up to 1,858 from 1,246 (49.1%); cuts up to 2,198 from 1,915 (12.7%)
Total Revisions activity will peak in next few weeks

While we are still seeing more estimate cuts than increases, the ratio has improved dramatically over the past month. This has been happening on a far larger total number of revisions.

I see this as a very significant "glimmer of hope". Half of the sectors are now, not just above 1.0, but into true positive territory.

Sector	Avg. 4wk EPS Change (FY1)	Revisions Ratio	Firms With FY1 EPS Increase	Firms With FY1 EPS Decrease
Telecom	7.70%	3.80	8	1
Technology	3.36%	1.75	41	31
Consumer Staple	0.04%	1.62	19	19
Consumer Disc	0.01%	1.50	44	33
Health Care	0.32%	1.39	30	24
Materials	-6.84%	0.66	14	14
Utilities	-1.36%	0.61	10	23
Industrials	-7.63%	0.43	17	41
Energy	-9.43%	0.40	8	31
Financial Services	-6.26%	0.34	13	67
S&P 500	-2.32%	0.85	204	284

The Zacks Revisions Ratio: 2010

Overall picture for 2010 similar to that of 2009
Revisions ratio up to 0.71 from 0.59
Telecom and Tech the strongest, Financials the weakest for 2010
Positive surprises leading to more upward revisions
Ratio of rising to falling mean estimates rises to 0.54 from 0.50
Total revisions activity should peak in a few weeks
Total number of revisions rises to 2,996 from 1,755 (70.7%)
Estimate increases rise to 1243 from 577 (115.5%), cuts rise to 1,753 from 1,200 (46.1%)

Sector	Avg. 4wk EPS Change (FY2)	Revisions Ratio	Firms With FY2 EPS Increase	Firms With FY2 EPS Decrease
Telecom	6.07%	1.83	7	2
Technology	2.14%	1.67	38	32
Consumer Discr	2.87%	1.32	42	34
Consumer Staples	0.11%	1.25	17	17
Materials	-9.71%	0.83	7	21
Health Care	0.53%	0.79	21	31
Utilities	-1.87%	0.38	7	25
Energy	-9.52%	0.38	2	37
Industrials	-6.77%	0.38	11	44
Financial Services	-10.76%	0.30	15	64
S&P 500	-2.97%	0.71	167	307

Earnings Shares and P/Es

P/Es are too low since earnings estimates are too high
Earnings Shares, including historical, based on current make up of S&P 500
Health Care expected to take Earnings crown from Energy in 2009, keep it in 2010
Energy Earnings Share expected to plunge to 11.8% from 23.6%
Financials 2009 earnings share expected to rise to 10.2% from -1.7% in 2008.
Consumer Discretionary market cap share far above earnings shares (overvalued?)
Health Care Market Cap share well below earnings shares (undervalued?)
12-month forward S&P P/E of 14.48 equates to earnings yield of 6.91%, which is very attractive relative to 10-year T-note yield of 3.33%, but only mediocre relative to 5.38% A-rated 10 year corporate.
T-note rates are rising and more realistic earnings yields of near 5.51% based on lower earnings ($55) means the spread, while still attractive, is not overwhelming.

Earnings Shares and P/Es
Sector	2008%	2009%	2010%	Market Cap %	P/E 2008	P/E 2009	P/E 2010
Technology	17.05%	15.97%	15.27%	17.97%	14.0	17.8	14.7
Health Care	16.73%	19.47%	16.97%	13.52%	10.8	11.0	10.0
Cons Staple	13.21%	15.34%	13.29%	12.93%	13.0	13.3	12.2
Financials	-1.73%	10.24%	14.07%	12.68%	NM	19.6	11.3
Energy	23.64%	11.83%	12.72%	12.50%	7.0	16.7	12.3
Industrials	13.97%	11.62%	9.80%	10.33%	9.8	14.1	13.2
Cons Disc.	4.21%	4.30%	7.29%	9.59%	30.3	35.2	16.5
Utilities	4.65%	5.35%	4.61%	3.82%	10.9	11.3	10.4
Telecom	4.38%	4.17%	3.48%	3.46%	10.5	13.1	12.4
Materials	3.88%	1.70%	2.50%	3.20%	11.0	29.7	16.0
S&P 500	100.00%	100.00%	100.00%	100.00%	13.3	15.8	12.5

Neil Malkin contributed significantly to this report.

Data in this report, unless stated otherwise, is through the close on Thursday 5/7/2009

The revisions ratio is simply divides the total number of positive estimate revisions by the total number of estimate cuts. A high ratio is a bullish indicator and a low ratio is bearish. For the S&P 500 as a whole, a number below 0.80 or above 1.25 is generally significant.

With smaller totals for any given sector than the S&P 500 over all, the ratio should be farther away from 1.0 to be truly significant. However, for the sake of consistency, we refer to readings above 1.25 as being in positive territory and below 0.80 as being in negative territory. In the average 4 week change column, we eliminate all firms where the change is either greater than =100% or less than -100%.

Zacks Investment Research

U.S. Unveils the Results of Bank Stress Tests

QualityStocks — Fri, 08 May 2009 14:10:57 +0000

U.S. regulators finally revealed the results of the long-awaited stress tests for the nation’s largest banks. Regulators urged ten of the country’s nineteen largest financial institutions to raise about $75 billion in new capital to withstand possible future losses. These institutions will attempt to raise capital by selling common stock among other methods. Among the institutions [...]

Stress Test: What The Results Mean – Analyst Blog

Zacks Market Commentaries — Fri, 08 May 2009 01:40:40 +0000

After market close, the Federal Reserve released its Supervisory Capital Assessment Program: Overview of Result (aka the overdue and over leaked results of the "Stress Test").

Clearly there is something for everyone in the results. Of the 19 financial institutions test, 10 were found to be in potential need of additional capital under the more adverse scenario. While we continue to disagree with the modification of the mark-to-market accounting rules as a measure to financial engineer reality, the effects did improve the potential scenarios on paper.

Of the $74.6 billion that will be needed to be raised, $64.6 billion or 86.6% was attributed to four institutions: Bank of America (BAC), Wells Fargo (WFC), GMAC LLC (GMAC), and Citigroup (C). It's interesting that the worst was leaked, perhaps to moderate the market's reaction. We continue to fret that the "More Adverse Scenario," may not be the worst scenario. But that's fodder for another blog.

What the "Stress Test" Means to Companies Under Our Coverage:

U.S. Bancorp (USB), BB&T (BBT) and MetLife (MET) do not need any additional capital at this time.

Wells Fargo needs $13.7 billion in new capital. It has already announced a $6 billion secondary market common equity offering. Plus, WFC plans to meet the remaining amount though lower expenses, dividend reduction and by issuing company stock to its benefit plans.

Fifth Third (FITB) intends to augment its common equity component of Tier 1 capital by $1.1 billion in the next 6 months to create a required capital buffer under the "more adverse scenario." In addition, considering that the required capital buffer related to the new Tier 1 common equity standard is 4.0% of risk-weighted assets through 2010 and the pro forma for the announced processing joint venture is 5.5%, the company should be able to utilize available private market alternatives to raise the $1.1 billion commitment. Therefore there should be no dilution of the share base at this time.

Regions Financial (RF) intends to augment its equity component of Tier 1 capital by $2.5 billion in the next 6 months to create the required capital buffer under the "more adverse scenario." When completed, Regions' current Tier 1 common to risk-weighted asset ratio on a pro forma basis should increase to more than 8.5% (from 6.5% reported on Mar 31). This will be more than twice the 4.0% required level.

While the company is still formulating its approach to procure the additional capital, this institution did not state that it would seek available private market alternatives. If RF were to do some sort of stock issuance, we could potentially see dilution at more than a $1 per share. Thus, we eagerly await its June 2009 release.

KeyCorp (KEY) needs to raise its tangible common equity by $1.8 billion. The company is exploring numerous alternatives, including exchanges of common shares for outstanding preferred and trust preferred shares, issuing common shares, or other alternatives.

KEY currently has $2.5 billion of TARP preferred stock. If it is unable to raise the required common capital from private, non-governmental sources over the next six months, then it will convert this stock into common equity in order to meet the capital requirement.

Read the full analyst report on "USB"
Read the full analyst report on "BBT"
Read the full analyst report on "MET"
Read the full analyst report on "WFC"
Read the full analyst report on "FITB"
Read the full analyst report on "KEY"
Zacks Investment Research

Stress Tests: 10 Banks Need Cash – Analyst Blog

Dirk Van Dijk — Fri, 08 May 2009 00:54:35 +0000

After the close of trading, the Fed released the results of the bank stress test.

19 banks were analyzed. Nine came out with no need to raise new capital, but 10 will.

The banks that will have to raise the largest amount of capital are Bank of America (BAC), Wells Fargo (WFC) and GMAC (partially owned by General Motors (GM)). The total for all 10 banks is $74.6 billion.

This is after the effects of the “better than expected earnings” in the first quarter and other capital actions that the banks have already taken or announced, such as selling off assets, or in the case of Citigroup (C), exchanging of TARP preferred shares into common stock.

Under the “more adverse” scenario (read, realistic scenario) the 19 bank holding companies (BHC) will suffer total losses during 2009 and 2010 of $600 billion. $455 billion of these losses will come from whole loans held on the banks’ balance sheets and $135 billion will come from available for sale securities. This is in addition to the losses that the BHC have already taken.

To determine if banks need to raise more capital, they had to have projected tier one capital of 6% of assets at the end of 2010, and at least 4% has to be common equity (as opposed to preferred).

There are 2 parts to this, the resources other than capital to absorb losses, which is mostly the net revenues that the firms will be generating this year and next, and the capital actions. The non-capital resources will supposedly absorb $362.9 billion of losses.

Even after allowing for the effects of the potential “earn out”, the losses would have been $185 billion. Most of that difference is from Citigroup, which was able to knock its capital raise requirement down from $92.6 billion to just $5.5 billion.

The results also break out the expected losses by type of loan.

In total, the largest percentage losses are expected to be in credit cards, at 22.2%, although the range of expected lasses varies widely from company to company. SunTrust (STI) is the lowest at 17.4% , whereas KeyCorp (KEY) is the highest at 39.9.

The next “ugliest” group of loans are expected to be second mortgages at 13.8% overall. Again there are huge variations in the expected loss rates, ranging from a low of 6.3% at KEY to a high of 21.2% at GMAC (lost another one at Ditech).

The best loan class is expected to be commercial and industrial loans with total defaults of just 6.1%. The loan category that overall looks far too low to me in terms of loss severities is Commercial Real Estate, with losses of 8.5% expected.

I will have a fuller analysis of this on Friday after I have had a chance to more fully digest the report.

Read the full analyst report on "KEY"
Read the full analyst report on "WFC"
Read the full analyst report on "GM"
Zacks Investment Research

Stock Market News for May 5, 2009 – Market News

Zacks Market Commentaries — Tue, 05 May 2009 14:55:30 +0000

Even as investors awaited anxiously the release of the stress test results, Asian markets rose to fresh seven-month peak amid optimism that the global economy is on a path to recovery. However, gains in Asia were modest as media reports suggested about 10 of the 19 banks undergoing stress tests in the U.S. have been directed by regulators to raise more capital. Oil prices hovered near $54 on optimism about the economy.

The Hang Seng index in Hong Kong ended the day up 49.03 points, or 0.3%, at 16,430.08. The Shanghai Composite Index in Mainland China edged up 0.3% to 2,567.34, its highest close in nine months. Japan's Nikkei 225 Stock Average added 1.7% to close at 8,977.37.

On Tuesday, U.S. stocks advanced as better-than-expected housing data and comments from U.S. officials that the Obama Administration is not seeking additional funds for banks boosted sentiments. Investors heaved a sigh of relief after White House spokesman Robert Gibbs remarked, "The administration doesn't believe we need to go to Congress right now." The S&P 500 jumped nearly 3.4% to end above 900 for the first time since January 8. The index turned higher for the first time this year and joined tech-heavy Nasdaq in showing gains for the year. The Dow Jones Industrial Average added 2.6% and is now up 29% since testing its low on March 9. Volume on the NYSE was brisk as 1.7 billion shares exchanged hands and advancing issues outran declining stocks by 2636 to 472.

Monday's better-than-expected housing news reignited hope the housing crisis may have touched its bottom. The March pending home sales jumped 3.2% to 84.6, taking economists by surprise who had expected the index to hold steady. Construction spending increased 0.3% versus an expected drop of 1.6%, and compared with a 1.0% drop in February.

All ten sectors on the S&P posted gains yesterday, with financials, up 9.0%, topping the list. Basic material stocks jumped 6.3%. Among metals, Alcoa (NYSE:AA) shares climbed 6.9%, Freeport-McMoran (NYSE:FCX) jumped 9.4% and BHP Billiton (NYSE:BHP) advanced 4.6%.

Banking stocks were the flavor of the day on the DJIA, with Bank of America (NYSE:BAC) shares rising 20%, American Express (NYSE:AXP) jumping 12.7% and JP Morgan (NYSE:JPM) recording a 10.2% advance. According to Reuters, the list of banks needing further capital has grown to ten as government methodology grew more stringent.

The S&P's bond-rating arm said 23 banks, including Bank of America (NYSE:BAC), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC), face possible downgrades. Others on the list are PNC Financial (NYSE:PNC), KeyCorp (NYSE:KEY), US Bancorp (NYSE:USB), BB&T (NYSE:BBT), Regions Financial (NYSE:RF), Huntington Bancshares (NASDAQ:HBAN), and Fifth Third (NASDAQ:FITB). Meanwhile, a Bank of America (NYSE:BAC) spokesman denied a media report that suggested the firm has been told by the regulators that it needs to raise $10 billion in fresh capital. JP Morgan's (NYSE:JPM) CEO Dimon reiterated the firm's desire to repay its $25 billion in TARP money as soon as possible after the test results are published. Wells Fargo (NYSE:WFC) shares jumped 24% despite an AP report that said the company may need additional capital.

Of today's key economic posts, the ISM services report is expected to indicate the economy's service sector improved for the first time in six months during April, with a 42.0 read, up from the prior month's 40.8 post. Fed Chairman Bernanke testifies before the Joint Economic Committee on the economic outlook (10:00 AM ET). Among additional Fed-speak are Rosengren, Stern and Yellen.

Zacks Investment Research

Earnings Trends Highlights: Verizon, AT&T, Texas Instruments, BJ Services and Keycorp – Press Releases

Dirk Van Dijk — Tue, 05 May 2009 10:16:41 +0000

Earnings Trends Highlights: Verizon, AT&T, Texas Instruments, BJ Services and Keycorp

For Immediate Release

Chicago, IL - May 5, 2009 - Zacks Research Director, Dirk Van Dijk says that S&P 500 earnings are continuing to show red ink. He tracks companies on the Zacks.com web site, naming names, while forecasting trends for the months ahead.

Key Points from Van Dijk's Latest Earnings Assessment

Total earnings are running 21.9% below last year, but up sharply from Q4
Financials much are better than expected, but quality of earnings is awful
Ex-Financials, total earnings are down 28.4% from a year ago and down 15.8% from Q4
Total net income down in all sectors but Financials, Utilities and Health Care
Health Care, Tech and Discretionary all showing lots of positive surprises
Full S&P 500 total net income expected to be 27.2% lower than Q1 2008
Decline expected to continue in Q2, with earnings down 31.9%
Total net income expected to fall 14.9% for all of 2009, after 18.9% fall in 2008
Bottom up estimate for S&P 500 now $57.76 in 2009 versus $59.36 last week.

Total Net Income Growth

First quarter total net income is 21.9% below what the same 289 firms reported a year ago, but 35.0% above what those firms reported in the fourth quarter. However, relative to the fourth quarter, almost all the improvement has come from the "earnings" of the Financial sector. (I put the term earnings in quotation marks due to the extraordinarily low quality of the earnings at the big banks that are driving the turnaround. It is hard to take seriously earnings that are based on mark to market for liabilities but not for assets. However, the accountants have signed off on them, so we include them in the database. )

Excluding the 51 Financial firms that have reported, total net income is down 28.4% from a year ago and 15.8% lower than in the fourth quarter.

Aside from the Financials, only the Utility sector is showing any significant gain in total net income at 6.1%. Health Care squeezes into the plus column, but by less than 0.1%.

Worst hit so far are the Materials (-71.4%) and Energy (-55.9%) sectors. They however are facing some very tough comparisons. The commodity boom was in full swing a year ago, and materials like copper were flying just as high as oil prices were...today, they are not flying quite so high.

The Consumer Discretionary (-54.7%) and Industrial (-37.4%) have also seen large drops in total net income. What do the 4 bad sectors have in common? They are the four most cyclical sectors of the economy.

Leaving aside the special case of the Financials, the 3 sectors that are doing best - Utilities, Health Care and Consumer Staples (-9.2%) - are noteworthy for being non-cyclical. Thus the pattern of earnings growth (or the lack there of) is exactly what you would expect in the middle of the worst economic downturn since the Depression.

The weak earnings are offset by the fact that the bar was set very low this quarter. Brokerage analysts expected Armageddon and we only got a disaster. As a result, positive earnings surprises are outpacing disappointments by a ratio of 2.3:1. The median surprise is a very healthy 4.8%.

Some of the sectors with the worst growth in total net income actually have the highest surprise ratios. In the Energy and Materials sectors positive surprises are running 3.5:1 over disappointments. Consumer Discretionary firms are seeing surprises running 4.3:1 over disappointments.

On the other hand, Health Care is doing even better than any of those sectors with a ratio of 4.8:1.

Scorecard and Median EPS Growth Rates

Surprise ratio at 2.30, median surprise 4.76% with 289 firms reporting
Median EPS decline reported so far is 18.1%
A 12.0% decline is seen in the first quarter for those yet to report
Positive surprises concentrated in the Discretionary, Health Care and Tech Sectors
Every sector but Telecom and Health Care is down so far among the reported firms
Among yet to report, Utilities, Health Care barely positive, the rest negative

We now have over half the reports in and positive surprises are outnumbering disappointments. That is however, mostly because the bar was set very low. Firms learned a long time ago that it is better to under promise and over deliver, so it is quite normal for positive surprises to outnumber disappointments.

This quarter's ratio is actually slightly below what we were accustomed to seeing in recent years. Still, better more positive surprises than more disappointments.

Half the firms have reported declines in EPS of 18.1% or more. Over two-thirds have reported negative EPS growth. Telecom is leading the EPS growth pack, but that is based on the results of only 4 firms. Health Care is the only other sector where more than half the firms are reporting growing EPS, with a median gain of 7.1%.

In 4 sectors, Industrials, Tech, Financials and Materials more than half the firms have seen EPS decline by a third or more.

The Zacks Revisions Ratio: 2009

Revisions ratio for full S&P 500 is up to 0.65, from 0.51 last week
Two months ago the ratio was 0.26; the improvement has been steady and strong
Five sectors above "one"; 4 are in positive territory
Although still in negative territory, the revisions ratio has risen significantly
Telecom and Tech lead the pack, both Consumer sectors are also strong
Energy and Financials still seeing more than 3 cuts for every increase.
Ratio of firms with rising to falling mean estimates rises to 0.51 from 0.40
Total number of revisions (4-week total) up to 3,161 from 2,386 last week (32.5%)
Increases up to 1,246 from 805 (54.8%); cuts up to 1,915 from 1,581 (21.1%)

The revisions ratio improved sharply, but remains in negative territory. (Generally we consider anything below 0.80 to be negative, and anything above 1.25 to be positive.)

Telecom and Tech are now in positive territory, with both Consumer sectors also knocking on the door. This is a very positive sign coming not long after every sector had been deep in negative territory.

Telecom and Technology leads the pack this week. Both Verizon (VZ) and AT&T (T) had far more increases than cuts. Within the Tech sector Stocks with very positive revisions activity worth mentioning include Apple (AAPL), Broadcom (BRCM), Intel (INTC) and Texas Instruments (TXN).

At the other end of the spectrum, Energy and Financials still have estimate cuts swamping increases. Very weak Energy stocks include BJ Services (BJS) and Anadarko (APC). Among the Financials, companies that are noteworthy for their weakness include Keycorp (KEY) and Suntrust Banks (STI).

The Zacks Revisions Ratio: 2010

The Overall picture for 2010 is similar to that of 2009
Revisions ratio up to 0.59 from 0.46
Positive surprises are leading to more upward revisions
Ratio of rising to falling mean estimates rises to 0.50 from 0.47
Tech and Staples the strongest; Energy and Utilities the weakest for 2010
Total revisions activity should peak in a few weeks
Total number of revisions rises to 2,355 from 1,757 (34.0%)
Estimate increases rises to 577 from 480 (20.2%); cuts rise to 1,200 from 1,142 (5.1%)
Energy, Utilities and Financials slammed

The 2010 revisions ratio story is pretty much the same as 2009. A low but improving revisions ratio. Just a month ago the 2010 revisions ratio was at 0.27, now it is at 0.59.

The Industrials sector has shown significant improvement, but still has more than 3 cuts per increase. Not long ago, cuts in the sector were running over 20;1 over increases. The Tech sector is the strongest, with particular strength among semiconductor stocks.

Earnings Shares and P/Es

P/Es are too low since earnings estimates are too high
Health Care expected to take earnings crown from Energy in 2009 and keep it in 2010
Energy's earnings share expected to plunge to 11.9% from 23.7%
Financials' 2009 earnings share expected to rise to 10.7% from -1.7% in 2008.
Consumer Discretionary's market cap share far above earnings shares (overvalued?)
Health Care's market cap is share well below earnings shares (undervalued?)
12-month forward S&P P/E of 13.87 equates to earnings yield of 7.21%, which is very attractive relative to 10-year T-note yield of 3.16%, but only mediocre relative to 5.43% A-rated 10-year corporate.
T-note rates are rising and more realistic earnings yields of near 5.72% based on lower earnings ($50) means the spread, while still attractive, is not overwhelming.

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Zacks Investment Research

Forecasts Respond to Positive Surprises – Earnings Trends

Dirk Van Dijk — Mon, 04 May 2009 05:00:00 +0000

Highlighted stocks include Verizon (VZ), AT&T (T), Apple (AAPL), Broadcom (BRCM), Intel (INTC), Texas Instruments (TXN), BJ Services (BJS), Anadarko (APC), Keycorp (KEY) and Suntrust Banks (STI).

Key Points:

Total earnings are running 21.9% below last year, but up sharply from Q4
Financials much are better than expected, but quality of earnings is awful
Ex-Financials, total earnings are down 28.4% from a year ago and down 15.8% from Q4
Total net income down in all sectors but Financials, Utilities and Health Care
Health Care, Tech and Discretionary all showing lots of positive surprises
Full S&P 500 total net income expected to be 27.2% lower than Q1 2008
Decline expected to continue in Q2, with earnings down 31.9%
Total net income expected to fall 14.9% for all of 2009, after 18.9% fall in 2008
Bottom up estimate for S&P 500 now $57.76 in 2009 versus $59.36 last week.

Total Net Income Growth

Excluding the 51 Financial firms that have reported, total net income is down 28.4% from a year ago and 15.8% lower than in the fourth quarter.

Aside from the Financials, only the Utility sector is showing any significant gain in total net income at 6.1%. Health Care squeezes into the plus column, but by less than 0.1%.

On the other hand, Health Care is doing even better than any of those sectors with a ratio of 4.8:1.

Total Net Income Growth (Reported)
Sector	Q3 '08 A	Q4 '08 A	Q1 '09 A	Q2 '09 E	2007 A	2008 A	2009 E	2010 E
Financials	-63.48%	-1009.83%	23.50%	-59.48%	-21.69%	-79.68%	36.68%	103.44%
Utilities	-2.87%	5.12%	6.07%	-8.67%	16.82%	5.07%	-2.97%	4.70%
Health Care	6.83%	8.07%	0.07%	-3.68%	20.70%	11.72%	-2.52%	9.94%
Cons. Stap.	7.56%	3.14%	-9.16%	11.16%	1.58%	7.41%	-1.39%	9.07%
Telecom	-7.37%	-8.95%	-19.08%	-23.92%	28.26%	3.63%	-18.67%	6.75%
Technology	10.90%	-24.61%	-30.25%	-30.48%	15.80%	17.49%	-21.34%	22.57%
Industrials	-1.21%	-21.06%	-37.40%	-39.71%	13.16%	-1.06%	-30.16%	7.96%
Cons. Disc.	-26.83%	-69.54%	-54.72%	-40.11%	14.91%	-20.85%	-19.93%	54.87%
Energy	42.37%	-23.50%	-55.94%	-65.34%	7.09%	17.85%	-57.69%	28.41%
Materials	12.76%	-62.68%	-71.37%	-67.61%	17.73%	-0.58%	-59.53%	71.85%
S&P	-9.88%	-37.32%	-21.86%	-34.24%	3.26%	-13.86%	-19.32%	25.02%

Total Net Income (Reported)
Sector	Q1 '09	Q1 '08	Q4 '08	Q4 '07
Health Care	$22,925	$22,909	$22,981	$21,265
Financials	$17,910	$14,502	-$18,707	$2,056
Technology	$12,253	$17,568	$16,670	$22,112
Industrials	$11,435	$18,265	$17,114	$21,682
Cons. Stap.	$7,609	$8,377	$8,161	$7,912
Telecom	$5,196	$6,421	$5,812	$6,383
Energy	$4,891	$11,102	$8,555	$11,184
Cons. Disc.	$3,110	$6,869	$2,199	$7,221
Materials	$1,804	$6,303	$1,515	$4,059
Utilities	$1,771	$1,579	$1,529	$1,382
S&P	$89,509	$114,555	$66,296	$105,771

Total Net Income Growth (Not Reported)
Sector	Q3 '08 A	Q4 '08 A	Q1 '09 E	Q2 '09 E	2007 A	2008 A	2009 E	2010 E
Financials	-151.23%	-984.75%	99.65%	0.00%	-7.52%	-178.28%	-168.36%	16.52%
Health Care	8.99%	12.11%	6.54%	-1.32%	13.02%	11.74%	1.59%	11.70%
Cons. Stap.	18.37%	0.42%	-10.18%	2.26%	12.35%	22.01%	-2.43%	9.15%
Utilities	-7.07%	-3.38%	-22.21%	45.79%	8.08%	1.87%	-1.22%	11.11%
Industrials	-44.09%	-139.32%	-22.24%	-3.23%	1.06%	-49.90%	51.98%	22.91%
Technology	-0.06%	-4.88%	-32.77%	-30.02%	2.65%	23.22%	-21.34%	15.37%
Telecom	-65.78%	-62.29%	-49.75%	-60.97%	-18.84%	-51.43%	-49.68%	-1.86%
Energy	65.24%	-27.36%	-58.60%	-60.69%	9.36%	23.71%	-57.03%	39.83%
Materials	-27.00%	-130.01%	-86.25%	-70.27%	-8.61%	-40.01%	-71.73%	138.51%
Cons. Disc.	-60.83%	-199.49%	-90.82%	23.97%	-7.02%	-85.61%	10.35%	323.15%
S&P	-14.64%	-101.11%	-36.29%	-27.66%	3.09%	-28.17%	-5.25%	27.44%

Total Net Income Growth (Combined)
Sector	Q3 '08 A	Q4 '08 A	Q1 '09 E	Q2 '09 E	2007 A	2008 A	2009 E	2010 E
Financials	-90.09%	-992.86%	37.29%	-43.79%	-18.19%	-107.22%	-584.48%	66.28%
Health Care	7.07%	8.51%	0.78%	-3.41%	19.79%	11.72%	-2.06%	10.14%
Cons. Stap.	13.38%	1.54%	-9.76%	5.99%	7.20%	15.39%	-1.99%	9.11%
Utilities	-5.72%	-0.63%	-13.70%	26.67%	10.76%	2.91%	-1.80%	9.02%
Telecom	-15.97%	-16.59%	-21.62%	-27.13%	18.24%	-4.42%	-20.97%	6.34%
Technology	7.46%	-18.88%	-31.08%	-30.34%	11.41%	19.25%	-21.34%	20.29%
Industrials	0.64%	-19.77%	-34.40%	-38.54%	13.93%	0.94%	-29.55%	6.87%
Energy	57.26%	-26.09%	-57.74%	-62.31%	8.57%	21.71%	-57.25%	36.08%
Cons. Disc.	-42.26%	-137.34%	-73.96%	-24.25%	1.73%	-56.40%	-14.44%	117.57%
Materials	2.20%	-81.98%	-74.33%	-68.06%	10.21%	-9.91%	-61.45%	79.56%
S&P	-11.56%	-62.00%	-27.20%	-31.94%	3.20%	-18.94%	-14.89%	25.87%

Scorecard and Median EPS Growth Rates

Surprise ratio at 2.30, median surprise 4.76% with 289 firms reporting
Median EPS decline reported so far is 18.1%
A 12.0% decline is seen in the first quarter for those yet to report
Positive surprises concentrated in the Discretionary, Health Care and Tech Sectors
Every sector but Telecom and Health Care is down so far among the reported firms
Among yet to report, Utilities, Health Care barely positive, the rest negative

This quarter's ratio is actually slightly below what we were accustomed to seeing in recent years. Still, better more positive surprises than more disappointments.

In 4 sectors, Industrials, Tech, Financials and Materials more than half the firms have seen EPS decline by a third or more.

First-Quarter Scorecard (Reported)
Sector	1Q '09 (A)	2Q '09 (A)	2008 (A)	2009 (E)	2010 (E)	% Reported	Median % Surprise	# Pos Surprise	# Neg Surprise	# Match
Telecom	21.64%	-15.88%	4.54%	-9.68%	6.68%	44.44%	6.39%	3	1	0
Healthcare	7.13%	2.40%	14.40%	5.28%	11.35%	70.37%	4.20%	29	6	3
Cons. Stap.	-2.99%	-5.88%	4.96%	0.00%	7.62%	41.46%	0.00%	8	5	4
Utilities	-5.32%	-7.80%	7.83%	-3.14%	7.07%	23.53%	4.83%	6	2	0
Cons. Disc.	-18.70%	-22.91%	-5.37%	-16.56%	10.43%	55.70%	14.23%	34	8	2
Energy	-26.42%	-48.70%	21.40%	-42.56%	-2.92%	48.72%	4.35%	14	4	1
Industrial	-33.85%	-23.91%	12.87%	-18.14%	10.89%	76.27%	2.44%	27	15	3
Tech	-40.18%	-39.41%	13.56%	-31.65%	10.90%	56.00%	8.60%	26	8	8
Financial	-40.78%	-48.15%	-21.79%	-28.95%	7.22%	62.96%	-2.08%	23	27	1
Materials	-53.79%	-39.71%	3.14%	-36.51%	12.97%	72.41%	6.94%	14	4	3
S&P 500	-18.10%	-20.93%	6.90%	-14.52%	9.71%	57.80%	4.76%	184	80	25

First-Quarter EPS Growth (Not Reported)
Sector	1Q '09 (E)	2Q '09 (E)	2008 (A)	2009 (E)	2010 (E)
Utilities	3.13%	4.26%	9.28%	1.40%	7.30%
Healthcare	1.24%	9.21%	13.39%	9.45%	10.66%
Cons. Stap.	-0.91%	4.81%	13.33%	11.11%	9.67%
Financial	-9.04%	-1.75%	11.79%	-5.39%	11.28%
Tech	-11.11%	-1.85%	16.98%	19.10%	12.58%
Telecom	-11.76%	5.70%	-14.78%	3.03%	-5.49%
Industrial	-23.91%	-24.49%	17.76%	13.78%	3.45%
Cons. Disc.	-26.67%	-23.44%	7.14%	-13.93%	13.43%
Energy	-56.42%	-70.27%	11.15%	22.02%	27.76%
Materials	-73.08%	-63.64%	-1.25%	-39.86%	18.88%
S&P 500	-12.03%	-5.45%	11.42%	5.78%	10.87%

The Zacks Revisions Ratio: 2009

Revisions ratio for full S&P 500 is up to 0.65, from 0.51 last week
Two months ago the ratio was 0.26; the improvement has been steady and strong
Five sectors above "one"; 4 are in positive territory
Although still in negative territory, the revisions ratio has risen significantly
Telecom and Tech lead the pack, both Consumer sectors are also strong
Energy and Financials still seeing more than 3 cuts for every increase.
Ratio of firms with rising to falling mean estimates rises to 0.51 from 0.40
Total number of revisions (4-week total) up to 3,161 from 2,386 last week (32.5%)
Increases up to 1,246 from 805 (54.8%); cuts up to 1,915 from 1,581 (21.1%)

The revisions ratio improved sharply, but remains in negative territory. (Generally we consider anything below 0.80 to be negative, and anything above 1.25 to be positive.)

Sector	Avg. 4wk EPS Change (FY1)	Revisions Ratio	Firms With FY1 EPS Increase	Firms With FY1 EPS Decrease
Telecom	0.05%	1.90	5	4
Technology	2.35%	1.68	29	38
Consumer Staple	-0.05%	1.22	14	23
Consumer Disc	-2.61%	1.22	36	40
Health Care	-0.07%	1.09	29	23
Materials	-8.06%	0.57	8	18
Utilities	-0.82%	0.39	10	22
Industrials	-8.02%	0.34	9	44
Financial Services	-6.27%	0.29	19	59
Energy	-12.52%	0.21	0	39
S&P 500	-3.37%	0.65	159	310

The Zacks Revisions Ratio: 2010

The Overall picture for 2010 is similar to that of 2009
Revisions ratio up to 0.59 from 0.46
Positive surprises are leading to more upward revisions
Ratio of rising to falling mean estimates rises to 0.50 from 0.47
Tech and Staples the strongest; Energy and Utilities the weakest for 2010
Total revisions activity should peak in a few weeks
Total number of revisions rises to 2,355 from 1,757 (34.0%)
Estimate increases rises to 577 from 480 (20.2%); cuts rise to 1,200 from 1,142 (5.1%)
Energy, Utilities and Financials slammed

The 2010 revisions ratio story is pretty much the same as 2009. A low but improving revisions ratio. Just a month ago the 2010 revisions ratio was at 0.27, now it is at 0.59.

Sector	Avg. 4wk EPS Change (FY2)	Revisions Ratio	Firms With FY2 EPS Increase	Firms With FY2 EPS Decrease
Technology	1.40%	1.65	34	33
Consumer Staples	-0.05%	1.52	22	15
Consumer Discr	0.81%	1.18	37	37
Telecom	-0.72%	0.76	4	5
Health Care	-0.41%	0.63	19	34
Materials	-7.96%	0.48	7	20
Industrials	-6.44%	0.29	4	49
Financial Services	-9.73%	0.27	17	60
Utilities	-1.39%	0.25	9	21
Energy	-10.85%	0.25	2	37
S&P 500	-3.34%	0.59	155	311

Earnings Shares and P/Es

P/Es are too low since earnings estimates are too high
Health Care expected to take earnings crown from Energy in 2009 and keep it in 2010
Energy's earnings share expected to plunge to 11.9% from 23.7%
Financials' 2009 earnings share expected to rise to 10.7% from -1.7% in 2008.
Consumer Discretionary's market cap share far above earnings shares (overvalued?)
Health Care's market cap is share well below earnings shares (undervalued?)
12-month forward S&P P/E of 13.87 equates to earnings yield of 7.21%, which is very attractive relative to 10-year T-note yield of 3.16%, but only mediocre relative to 5.43% A-rated 10-year corporate.
T-note rates are rising and more realistic earnings yields of near 5.72% based on lower earnings ($50) means the spread, while still attractive, is not overwhelming.

Earnings Shares and P/Es
Sector	2008%	2009%	2010%	Market Cap %	P/E 2008	P/E 2009	P/E 2010
Technology	17.06%	15.90%	15.20%	18.81%	14.2	17.9	14.9
Health Care	16.74%	19.29%	16.88%	13.44%	10.3	10.5	9.6
Cons Staple	13.21%	15.23%	13.20%	13.17%	12.8	13.1	12.0
Energy	23.65%	11.89%	12.86%	12.33%	6.7	15.7	11.5
Financials	-1.73%	10.78%	14.24%	11.88%	NM	16.7	10.0
Industrials	13.98%	11.58%	9.84%	10.17%	9.4	13.3	12.4
Cons Disc.	4.17%	4.19%	7.25%	9.68%	29.8	34.9	16.0
Utilities	4.50%	5.32%	4.61%	3.81%	10.9	10.8	9.9
Telecom	4.53%	4.05%	3.42%	3.56%	10.1	13.3	12.5
Materials	3.88%	1.76%	2.51%	3.15%	10.5	27.1	15.1
S&P 500	100.00%	100.00%	100.00%	100.00%	12.9	15.1	12.0

Neil Malkin contributed significantly to this report.

Data in this report, unless stated otherwise, is through the close on Thursday 4/30/2009

Zacks Investment Research

Stress Tests: What’s Next? – Analyst Blog

Zacks Market Commentaries — Mon, 27 Apr 2009 19:44:21 +0000

Highlights include Citigroup, Inc. (C), Regions Financial Corp. (RF), SunTrust Banks, Inc. (STI), KeyCorp (KEY) and Fifth Third Bancorp (FITB).

On Friday, the Federal Reserve released details about the methodology of the "stress tests" conducted by it on 19 banks with assets exceeding $100 billion. The results were shared with the respective banks and the banks have this week to dispute the Regulator's assessment of the losses and capital requirements. Final capital assessment will be disclosed on May 4, 2009.

As we already stated in our recent blog, there was very little new information in the White Paper released by the Federal Reserve.

Further, the Paper failed to provide some critical details on loss projections and level of capital reserves that the banks will be required to maintain. In the absence of clarity by regulators, the market is rife with rumors, speculations and "leaked reports" on which banks will be required to raise capital.

If all the banks or even most of the banks are found to be "adequately capitalized" then the entire process will be seen as "whitewash" by the market. These tests were supposed to bring back confidence in the financial system and to make sure the institutions can withstand a deepening economy and will lose their credibility if most banks "pass" the test.

The process has already faced a lot of criticism since the tests are not "stressful" enough. The assumptions for the "baseline" and "more adverse scenario" were laid down back in February. Since then, unemployment has continued to rise and many economists have downgraded their expectations for economic growth for this year. But Friday's stress test guidelines show that despite signs of the economy worsening, the regulators did not change their assumptions -- though they acknowledged that "the economy has deteriorated somewhat and professional forecasters have revised their outlooks for GDP growth and the unemployment rate."

Further, they clarified that the "more adverse alternative" is not intended to be a worst-case scenario. These tests would have been more useful if the regulators had considered the worst-case scenario and then carried out a meaningful estimate of the capital.

There are reports that while some banks will be asked to raise capital, others will be asked to improve the quality of their capital by increasing the common equity. We think that it will not be easy for the banks to raise private capital in the current environment and as a result, they will either receive bailout money, or the Government will convert its existing preferred capital into common equity -- as already being done in the case of Citigroup (C). Both the measures will dilute the existing shareholders.

Larry Summers, the director of National Economic Council, recently talked about "asset liability swaps that would have the effect of perhaps diluting some shareholders, but also fortifying the level of capital" as an alternative for shoring up the capital of the banks. So far, the Government has protected the bondholders of these banks. But it appears that the Government is now open to the idea of converting the debt into equity.

Current focus seems to be on some Regional Banks having large exposure to Commercial Real Estate (CRE) loans, like Regions Financial (RF), SunTrust (STI), KeyCorp (KEY) and Fifth Third Bancorp (FITB). These banks appear to be undercapitalized to absorb the future losses as the in CRE pricing continues to deteriorate sharply.

Read the full analyst report on "RF"
Read the full analyst report on "KEY"
Read the full analyst report on "FITB"
Zacks Investment Research

How to Protect Your Finances from Reckless Government Spending

Contrarian Profits — Thu, 23 Apr 2009 20:17:38 +0000

tr strongNotes from thebr / Investment Underground/strong /tr tr pThursday, April 23, 2009/p pPalermo Viejo, Buenos Aires, Argentina/p pstrongThe greatest economic disaster in recorded history (and how to profit from it)#8230; Your market ”script”#8230; Lessons on guerrilla investing#8230; Banks switch sides#8230; The best communications company in the world#8230; 3 sectors you should own now#8230; Your key to “permanent wealth”#8230; A massive glitch in the administration’s matrix#8230;/strongstrong /strong strongemNotes/em subscribers beat up on your editor#8230; 1,159% gains as stocks go bust#8230; And more! /strong/p pstrong*** “The current administration#8217;s economic strategy could create the greatest economic disaster in recorded history,” /strong says a href="http://www.contrarianprofits.com/articles/author/porter-stansbury/" class="alinks_links"Porter Stansberry/a in today’s ema href="http://www.dailywealth.com" class="alinks_links"DailyWealth/a./em/p ulNot only is the administration planning on enormous deficit spending this year, but the current plan calls for increasing deficit spending emfor the next decade /em– spending that will more than#8230;/ul/tr

FDIC: The Next Big Bailout – Analyst Blog

Dirk Van Dijk — Thu, 23 Apr 2009 15:09:58 +0000

Highlights include Citigroup Inc. (C), Bank of America Corp. (BAC), KeyCorp (KEY) and Fifth Third Bancorp (FITB).

Even before the FDIC gets into the business of insuring loan to the PPIP (there will be no losses there, according to their accountant Lewis Carroll), it looks like the fund is in pretty bad shape. As a percent of insured deposits, it fell to 0.40% at the end of the fourth quarter from 0.76% at the end of the third quarter, and 1.22% at the end of 2007.

Since then, 26 banks have failed -- the same number as in all of 2008. The year-end reserve ratio for the fund was the lowest since the second quarter of 1993, at the tail end of the S&L debacle (back then, banks and S&L’s had separate funds, but on a combined basis).

Given the failures so far this year, there is no doubt in my mind that the reserve ratios have declined sharply since the end of last year. The graph below shows the trend (larger version available at http://globaleconomicanalysis.blogspot.com/2009/04/fdic-woefully-underfunded-problem.html).

Clearly we have not seen the end of bank failures this year. You should count on at least one FDIC pizza party each week for the rest of the year. At the end of last year there were a total of 252 banks that were listed as troubled by the FDIC, up from 76 at the end of 2007 and 50 at the end of 2006.

The assets of troubled institutions has grown even more quickly, to $159.4 billion at the end of 2008, from $22.2 billion at the end of 2007 and just $8.3 billion at the end of 2006. The FDIC historically has been very hesitant about putting banks on the list, for example, none of the biggest disasters of 2008 (Indymac, WAMU, Wachovia) were on the list at the end of 2007. Thus, it is likely that this list significantly understates the problem.

None of the big 19 currently undergoing the so-called "stress tests" are on the list. If the results of the tests come out and they say that all 19 passed with flying colors, the whole world will rightfully yell WHITEWASH.

The AP story yesterday said that the tests are going to take a harder line on whole loans than on securitized investments. This makes no sense to me, except from a political gamesmanship point of view.

Somebody will have to be thrown under the bus, and since it can’t be Citigroup (C) or Bank of America (BAC), it will probably be KeyCorp (KEY) or Fifth Third (FITB). That would be the only reason to be tougher on whole loans (largely held by the regional banks) than on the securitized stuff (MBS, CDO etc). After all, with a whole loan, the banker probably even knows who the borrower is, not so true with the securitized stuff.

If one puts any sort of reasonable loss expectations from the PPIP, it is clear that the FDIC will soon be insolvent. Don’t worry, I’m not trying to start a run on the banks -- your checking account will still be there if your bank goes under (up to $250,000). However, the FDIC will need an emergency loan from the Fed or a bailout from Congress to make sure that happens.

I have no doubt that such funding would come through. However, it is likely to be the next big ticket bailout coming down the line, and it will probably be a doozy.

Read the full analyst report on "KEY"
Read the full analyst report on "FITB"
Zacks Investment Research

Stock Market News for April 7, 2009 – Market News

Zacks Market Commentaries — Tue, 07 Apr 2009 14:16:12 +0000

U.S. markets closed modestly lower Monday paring losses recorded earlier in the day amid banking worries and investor concerns that gloomy earnings and outlook will hurt technology, commodities and industrial shares. The KBW Banking index slipped 3.8% after a prominent banking analyst advised selling banking stocks. Calyon Securities analyst Mike Mayo in a report titled "Seven Deadly Sins of Banking" warned bank losses could exceed levels seen during the Great Depression. Stocks advanced in the late afternoon session paring some losses but the rally was checked after reports emerged that talks for IBM Corp.'s (NYSE: IBM) $7 billion deal to buy Sun Microsystems (NASDAQ: JAVA) had hit a roadblock. Sun Microsystems (NASDAQ: JAVA) shares plunged 23%.

Mayo started coverage on several banking stocks with an "underperform" or "sell" rating. Among securities initiated with a sell rating were: BB&T Corp (NYSE:BBT), Fifth Third Bancorp (NASDAQ:FITB), KeyCorp (NYSE:KEY), SunTrust Banks (NYSE:STI) and US Bancorp (NYSE:USB). Underperform ratings were assigned to Bank of America (NYSE:BAC), Citigroup (NYSE:C), Comerica (NYSE:CMA), JP Morgan (NYSE:JPM), PNC Financial Services Group (NYSE:PNC), and Wells Fargo (NYSE:WFC).

Toward the end of the day, however, banking analyst Meredith Whitney supported the outlook for the banks, expecting a rise in share prices upon realization of the group's rising tangible book values, although still maintaining that the sector may not get "out of the woods" until mid-2010. This morning a London newspaper report cited an IMF projection likely to place banks' toxic debt level at as much as $4 trillion, up from its January estimates of $2.2 trillion.

Among declining banking stocks, JP Morgan Chase (NYSE: JPM) lost 3.7% to $28.20, Well Fargo (NYSE: WFC) dropped 6.7% to $15.25 and SunTrust Banks (NYSE: STI) fell 8.1% to $12.70. The Dow Jones Industrial Average slid 41.74 points, or 0.5%, to 7975.85. Tech-heavy Nasdaq declined 15.16 points or 0.93% at 1,606.71. The Standard & Poor's 500 Index .SPX lost 7.02 points, or 0.83 percent, to 835.48.

Investors preferred to remain on the sidelines on the eve of the earnings season which kicks off today with Alcoa's (NYSE:AA) expected post of a quarterly loss after the close. NYSE volume slowed to 1.3 billion shares, as declining issues outpaced advancing shares by more than two to one. The Vix volatility measure headed up from Friday's two-month lows, with a 3.1% jump to 40.93.

The Baltic Dry Index, widely interpreted as a measure of world trade, fell to its lowest point since February 4, down 1.3% on Monday, sending economically-sensitive oil and gas and basic material sector stocks down 2.2% and 1.7%, respectively. Rio Tinto (NYSE:RTP) announced plans to slow construction of an aluminum refinery and cut bauxite production citing dwindling demand. Deutsche Bank (NYSE:DB) slashed its projections for steel maker earnings, citing lower prices and demand.

Automakers remained in focus as Ford (NYSE:F) reported results of a tender offer which reduced the firm's debt by 28% from $25.8 billion at the end of 2008. The auto maker's shares topped the list of S&P performers Monday, rising 16%, upon its elimination of $9.9 billion in debts. Nevertheless, S&P dropped its credit ratings on the company. Moreover, a Barron's article noted the company likely to benefit from problems at General Motors (NYSE:GM) and Chrysler. General Motors (NYSE:GM) shares gained 8.1%, topping the list of gaining issues on the DJIA.

Goldman Sachs (NYSE:GS) removed Cisco Systems (NASDAQ:CSCO) from its "conviction buy" list, saying growth expectations were "largely priced in."

Today's expected reports include February's consumer credit figures (2:00 PM ET). Consumer credit is expected to show a contraction of $3.0 billion following its $1.8 billion increase in January. The SEC meets tomorrow at 9:00 PM ET to address the uptick rule. Among companies due to release quarterly results are: Alcoa (NYSE:AA), Bed Bath and Beyond (NASDAQ:BBBY), Chattem (NASDAQ:CHTT), and Mosaic (NYSE:MOS).

Zacks Investment Research

Zacks Industry Outlook Highlights: Wilmington Trust, KeyCorp, Comerica, Freddie Mac and Sallie Mae – Press Releases

Zacks Market Commentaries — Thu, 02 Apr 2009 12:35:00 +0000

For Immediate Release

Chicago, IL - April 2, 2009 - Zacks.com announces the latest Industry Outlook. Today's outlook from Zacks Equity Research analyst Neena Mishra discusses the U.S. Banks sector. Highlighted stocks include: <Wilmington Trust Corporation (WL), KeyCorp (KEY), Comerica (CMA), Freddie Mac (FRE) and Sallie Mae (SLM).

Here is the latest on the U.S. Banks sector:

It was recently reported that U.S. credit card delinquencies rose to a record high in February and are expected to rise further. We expect the asset quality deterioration to continue at least through the end of FY09.

As a result of rise in charge-offs, the levels of reserve coverage have fallen over the past quarters and the banks will have to make higher provisions in the coming quarters, affecting the profitability. Further, the banks will also continue to take mark-downs in the investment portfolios, further hurting the bottom-line.

We currently do not see any opportunities and thus do not have a Buy recommendation on any stocks within this industry.

The banks with high exposure to housing and Commercial Real Estate loans like Wilmington Trust Corporation (WL), KeyCorp (KEY) and Comerica (CMA) will continue to remain under pressure.

We also maintain Sell recommendation on Freddie Mac (FRE) and Sallie Mae (SLM) as we anticipate rising losses and increased provisions through FY09.

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Zacks Investment Research

U.S. Banks – Industry Outlook

Zacks Market Commentaries — Thu, 02 Apr 2009 05:00:00 +0000

While the various programs launched by the Treasury and the Federal Reserve to boost the capital levels and alleviate the liquidity problems (including capital injections and debt guarantee programs) have helped the capital and funding concerns to a great extent, the efforts have not succeeded in restoring the lending activity at banks. Lower lending activity will continue to hurt the margins though the low interest rate environment should be beneficial to the banks with a liability sensitive balance sheet.

For the last few quarters, the banks have mainly suffered due to the losses in the mortgages and Commercial Real Estate (residential construction loans). Housing prices have continued to decline, and given the sharp increase in the level of unemployment, we anticipate continued losses in these portfolios. Further, deterioration in other Commercial Real Estate loans has started rather recently, and the downturn in this class in also likely to be very challenging.

With the deterioration in the overall economic environment and rising job losses, we anticipate the losses will increase in all the other asset classes as well, especially in the consumer-related loans. It was recently reported that U.S. credit card delinquencies rose to a record high in February and are expected to rise further. We expect the asset quality deterioration to continue at least through the end of FY09.

OPPORTUNITIES

We currently do not see any opportunities and thus do not have a Buy recommendation on any stocks within this industry.

WEAKNESSES

The banks with high exposure to housing and Commercial Real Estate loans like Wilmington Trust Corporation (WL), KeyCorp (KEY), Zions Bancorp (ZION) and Comerica (CMA) will continue to remain under pressure.

We also maintain Sell recommendation on Freddie Mac (FRE) and Sallie Mae (SLM) as we anticipate rising losses and increased provisions through FY09. Zacks Investment Research

U.S. Banks – Industry Outlook

Zacks Market Commentaries — Wed, 01 Apr 2009 19:32:04 +0000

We maintain a Negative outlook on the U.S. Banks -- though we are now less negative than we were at the time of our earlier reports, as we see some signs of deceleration in the economic slowdown. Further, we are hopeful about the Treasury's Financial Stability Plan, but we think that the effect will take quite some time to come by.

While the various programs launched by the Treasury and the Federal Reserve to boost the capital levels and alleviate the liquidity problems (including capital injections and debt guarantee programs) have helped the capital and funding concerns to a great extent, the efforts have not succeeded in restoring the lending activity at banks. Lower lending activity will continue to hurt the margins though the low interest rate environment should be beneficial to the banks with a liability sensitive balance sheet.

For the last few quarters, the banks have mainly suffered due to the losses in the mortgages and Commercial Real Estate (residential construction loans). Housing prices have continued to decline, and given the sharp increase in the level of unemployment, we anticipate continued losses in these portfolios. Further, deterioration in other Commercial Real Estate loans has started rather recently, and the downturn in this class in also likely to be very challenging.

With the deterioration in the overall economic environment and rising job losses, we anticipate the losses will increase in all the other asset classes as well, especially in the consumer-related loans. It was recently reported that U.S. credit card delinquencies rose to a record high in February and are expected to rise further. We expect the asset quality deterioration to continue at least through the end of FY09.

As a result of rise in charge-offs, the levels of reserve coverage have fallen over the past quarters and the banks will have to make higher provisions in the coming quarters, affecting the profitability. Further, the banks will also continue to take mark-downs in the investment portfolios, further hurting the bottom-line.

OPPORTUNITIES

We currently do not see any opportunities and thus do not have a Buy recommendation on any stocks within this industry.

WEAKNESSES

The banks with high exposure to housing and Commercial Real Estate loans like Wilmington Trust Corporation (WL), KeyCorp (KEY), Zions Bancorp (ZION) and Comerica (CMA) will continue to remain under pressure.

We also maintain Sell recommendation on Freddie Mac (FRE) and Sallie Mae (SLM) as we anticipate rising losses and increased provisions through FY09.

Zacks Investment Research

Credit Where It’s Due

Bullish Bankers — Sun, 29 Mar 2009 11:00:36 +0000

An in-depth outlook on the U.S. credit card industry and the competing payment networks. Visa and MasterCard are poised to take advantage of a majority of the market growth as consumers move more to electronic payments rather than paper.

KeyCorp (KEY) – Bear of the Day

Zacks Market Commentaries — Thu, 12 Mar 2009 05:00:00 +0000

KeyCorp's (KEY) 4Q08 loss from continuing operations came in at $1.13 per share, substantially worse than the estimates. Higher-than-expected losses resulted from goodwill impairment charge due to a reduction in fair value of net assets in its National Banking segment and a continuing rise in loan loss provisions.

However, the Community Banking segment continued to experience organic growth aided by the U.S.B. acquisition. Credit quality deteriorated significantly during the quarter. Though the company strengthened its balance sheet with the injection of fresh capital and has taken steps to reduce its exposure to the Commercial Real Estate (CRE) home builders segment, we anticipate higher losses in the CRE portfolio in the coming quarters in view of its sizeable exposure to risky markets.

As such, we are maintaining our Sell rating on the shares of KEY. Our 6-month target price of $5.35 share assumes that KEY will trade at 15.3 times our FY10 earnings estimate. Combined with the reduced $0.25 per share annual dividend, this price target implies an expected 9.7% negative return over the period, which is consistent with our Sell rating. Zacks Investment Research

Earnings Preview for Jan 19-23 – Earnings Preview

Charles Rotblut — Fri, 16 Jan 2009 00:00:00 +0000

NetScout Systems, Inc. (NTCT) could top expectations. Burlington Northern Santa Fe Corporation (BNI) and General Electric Company (GE) could miss estimates.

The U.S. equity markets will be closed on Monday, Jan 19, in observance of Martin Luther King, Jr. Day. The markets will be open on Tuesday, Jan 20, though volume could be light because of the inauguration.

This will be the first busy week of fourth-quarter earnings season, with 149 companies scheduled to report. Large-cap stocks will dominate the news with 53 S&P 500 members releasing results. Dow components will include General Electric Company (GE), International Business Machines (IBM), Johnson & Johnson (JNJ), Microsoft (MSFT) and United Technologies Corporation (UTX).

The economic calendar is very light.

Wednesday: Weekly crude inventories
Thursday: December housing starts, December building permits, weekly initial jobless claims

No Fed officials are scheduled to give speeches. The Fed will hold a 2-day meeting starting on Jan 27.

Companies That Could Issue Positive Earnings Surprises

NetScout Systems, Inc. (NTCT) recently raised its fiscal third-quarter guidance. Citing strong demand from wireless carriers and growth in other markets, the company now anticipates having earned between 16 cents and 18 cents per share. Half of the 4 covering analysts raised their forecasts in response, pushing the consensus earnings estimate 5 cents higher to 16 cents per share. The most accurate estimate is far more bullish at 22 cents per share. NTCT has topped expectations for 4 consecutive quarters. NetScout is scheduled to report on Thursday, Jan 22, after the close of trading.

Companies That Could Issue Negative Earnings Surprises

Profit forecasts for Burlington Northern Santa Fe Corporation (BNI) have been falling lately, with 6 brokerage analysts reducing their fourth-quarter projections during the last 30 days. Though the railroad company does have a history of topping expectations, a recent warning from a competitor could end the streak. The consensus earnings estimate calls for fourth-quarter profits of $1.78 per share. The most accurate estimate is more bearish at $1.75 per share. Burlington Northern Santa Fe Corporation is scheduled to report on Wednesday, Jan 21, before the start of trading.

General Electric Company (GE) reaffirmed its fourth-quarter EPS guidance of 50 to 52 cents per share in mid-December. Since that time, 5 brokerage analysts have cut their quarterly projections. The negative revisions caused the consensus earnings estimate to fall to 44 cents per share. The most accurate estimate is more bearish at 42 cents per share. The conglomerate has missed once in the past 3 quarters. General Electric Company is scheduled to report on Friday, Jan 23, before the start of trading.

Charles Rotblut, CFA is the senior market analyst for Zacks.com. He can be reached at crotblut@zacks.com.

Surprise Trader can help you turn earnings surprises into quick profits. Learn how.

Earnings Calendar

Here is a list of companies that we have confirmed will report during the week of Jan 19 - 23¹. Prices are as of Thursday's, Dec 18, market close.

Company	Ticker	Zacks Consensus Estimate	Year Ago Actual	Last Qtr Surprise	Report Date	Report Time	Price
First Defiance	FDEF	$0.30	$0.50	(34.8%)	1/19/2009	AMC	$8.00
Fuller(Hb) Co	FUL	$0.24	$0.53	0.0%	1/19/2009	N/A	$14.19
Logitech Intl	LOGI	$0.44	$0.71	(15.8%)	1/19/2009	AMC	$13.75
Macatawa Bank	MCBC	($0.15)	($0.16)	37.5%	1/19/2009	AMC	$2.50
S&T Bancorp Inc	STBA	$0.57	$0.54	(9.5%)	1/19/2009	BTO	$30.51
Candela Corp	CLZR	($0.17)	($0.13)	(350.0%)	1/20/2009	AMC	$0.48
Capital Bank	CBKN	$0.14	$0.13	(10.0%)	1/20/2009	N/A	$6.50
Commerce Bancsh	CBSH	$0.62	$0.74	(8.5%)	1/20/2009	BTO	$37.82
Cree Inc	CREE	$0.10	$0.08	0.0%	1/20/2009	AMC	$16.98
Csx Corp	CSX	$0.90	$0.85	(2.2%)	1/20/2009	AMC	$30.18
Fastenal	FAST	$0.41	$0.38	4.0%	1/20/2009	BTO	$33.20
Forest Labs A	FRX	$0.76	$0.96	15.9%	1/20/2009	BTO	$26.00
Fulton Finl	FULT	($0.55)	$0.22	(8.7%)	1/20/2009	AMC	$8.05
Hancock Hldg Co	HBHC	$0.57	$0.60	(24.2%)	1/20/2009	AMC	$35.85
Iberiabank Corp	IBKC	$0.72	$0.81	(2.5%)	1/20/2009	AMC	$41.22
Intl Bus Mach	IBM	$3.03	$2.80	0.5%	1/20/2009	AMC	$84.12
Jefferies Gp-Nw	JEF	($2.38)	($0.17)	(216.7%)	1/20/2009	BTO	$12.67
Johnson & Johns	JNJ	$0.92	$0.88	5.4%	1/20/2009	BTO	$57.62
New Oriental Ed	EDU	$0.07	$0.10	7.3%	1/20/2009	BTO	$54.47
Omnova Solution	OMN	$0.09	$0.09	33.3%	1/20/2009	BTO	$0.66
Pacific Contl	PCBK	$0.27	$0.28	(7.4%)	1/20/2009	AMC	$12.32
Packaging Corp	PKG	$0.26	$0.46	(7.3%)	1/20/2009	AMC	$13.37
Parker Hannifin	PH	$0.85	$1.23	7.1%	1/20/2009	BTO	$39.77
Petmed Express	PETS	$0.20	$0.18	25.0%	1/20/2009	BTO	$16.43
Raymond Jas Fin	RJF	$0.35	$0.47	5.4%	1/20/2009	AMC	$16.26
Regions Finl Cp	RF	($0.02)	$0.24	(46.4%)	1/20/2009	BTO	$6.10
State St Corp	STT	$1.16	$1.38	3.3%	1/20/2009	BTO	$38.00
Suncor Energy	SU	$0.39	$0.66	0.0%	1/20/2009	BTO	$21.11
Supertex Inc	SUPX	$0.20	$0.26	6.1%	1/20/2009	AMC	$21.65
Td Ameritrade	AMTD	$0.31	$0.40	(3.3%)	1/20/2009	BTO	$12.63
Tessco Tech Inc	TESS	$0.33	$0.29	N/A	1/20/2009	AMC	$10.35
West Cst Bcp/Or	WCBO	($0.09)	($0.49)	140.0%	1/20/2009	N/A	$4.39
Westell Tech-A	WSTL	($0.05)	($0.04)	22.2%	1/20/2009	AMC	$0.28
Woodward Govnr	WGOV	$0.38	$0.36	0.0%	1/20/2009	AMC	$21.06
Abbott Labs	ABT	$1.06	$0.93	2.6%	1/21/2009	BTO	$49.22
Actions Semicon	ACTS	$0.05	$0.23	(10.0%)	1/21/2009	AMC	$1.40
Adtran Inc	ADTN	$0.28	$0.27	0.0%	1/21/2009	BTO	$14.84
Air Prods & Che	APD	$0.98	$1.16	0.8%	1/21/2009	BTO	$56.07
Allegheny Tech	ATI	$0.89	$1.45	5.1%	1/21/2009	BTO	$25.55
Amdocs Ltd	DOX	$0.50	$0.50	(14.3%)	1/21/2009	AMC	$19.42
Amr Corp	AMR	($0.65)	($0.74)	4.8%	1/21/2009	BTO	$10.98
Blackrock Inc	BLK	$1.13	$2.52	(16.6%)	1/21/2009	BTO	$116.67
Burlngtn Nsf Cp	BNI	$1.78	$1.46	12.4%	1/21/2009	BTO	$63.37
Celadon Group	CLDN	$0.07	$0.08	8.3%	1/21/2009	AMC	$8.10
Charlotte Russe	CHIC	$0.11	$0.56	(93.3%)	1/21/2009	AMC	$4.74
Cnh Global Nv	CNH	$0.69	$0.50	36.3%	1/21/2009	AMC	$14.86
Coach Inc	COH	$0.67	$0.69	0.0%	1/21/2009	BTO	$16.81
F5 Networks Inc	FFIV	$0.26	$0.21	28.6%	1/21/2009	AMC	$23.20
Hudson City Bcp	HCBK	$0.27	$0.16	0.0%	1/21/2009	BTO	$13.16
Igate Corp	IGTE	$0.14	$0.09	15.4%	1/21/2009	BTO	$6.50
Kinder Morg Eng	KMP	$0.54	$0.53	(18.6%)	1/21/2009	AMC	$47.57
Labranche & Co	LAB	$0.17	$0.04	0.0%	1/21/2009	BTO	$5.68
Mcmoran Explor	MMR	($0.32)	$0.31	21.5%	1/21/2009	BTO	$8.79
Mts Systems	MTSC	$0.49	$0.47	26.9%	1/21/2009	AMC	$25.96
Noble Corp	NE	$1.50	$1.35	5.1%	1/21/2009	AMC	$21.44
Northern Trust	NTRS	$0.96	$0.97	(31.8%)	1/21/2009	BTO	$48.28
Nve Corp	NVEC	$0.40	$0.36	17.1%	1/21/2009	AMC	$23.66
Polycom Inc	PLCM	$0.32	$0.28	0.0%	1/21/2009	AMC	$14.02
Popular Inc	BPOP	($0.37)	($0.23)	39.7%	1/21/2009	BTO	$4.89
Precision Castp	PCP	$1.70	$1.73	(1.6%)	1/21/2009	BTO	$54.68
Progressive Cor	PGR	$0.35	$0.34	(412.1%)	1/21/2009	N/A	$13.99
Sanmina-Sci Cp	SANM	$0.01	$0.02	0.0%	1/21/2009	AMC	$0.38
Seagate Tech	STX	($0.03)	$0.76	13.0%	1/21/2009	AMC	$4.33
Somanetics Corp	SMTS	$0.23	$0.19	15.0%	1/21/2009	BTO	$16.31
Ual Corp	UAUA	($4.03)	($0.47)	17.8%	1/21/2009	BTO	$11.14
Us Bancorp	USB	$0.27	$0.66	(37.3%)	1/21/2009	BTO	$19.02
Utd Techs Corp	UTX	$1.23	$1.08	3.0%	1/21/2009	BTO	$49.69
Wipro Ltd-Adr	WIT	$0.14	$0.14	0.0%	1/21/2009	N/A	$7.19
Adv Micro Dev	AMD	($0.53)	($0.17)	132.5%	1/22/2009	AMC	$2.26
Amcore Finl Inc	AMFI	($0.30)	$0.33	(777.8%)	1/22/2009	BTO	$3.35
Amer River Bsh	AMRB	$0.33	$0.36	2.9%	1/22/2009	BTO	$9.90
Amerisourcebrgn	ABC	$0.69	$0.62	4.3%	1/22/2009	BTO	$36.85
Assoc Banc Corp	ASBC	$0.32	$0.55	2.8%	1/22/2009	N/A	$16.12
Au Optroncs-Adr	AUO	($0.53)	$1.24	47.4%	1/22/2009	BTO	$7.20
Avnet	AVT	$0.66	$0.89	(5.6%)	1/22/2009	BTO	$17.91
Avx Corp	AVX	$0.09	$0.22	0.0%	1/22/2009	BTO	$7.71
Bancorpsouth	BXS	$0.31	$0.39	(20.9%)	1/22/2009	AMC	$18.81
Bank Of Ny Mell	BK	$0.68	$0.67	43.6%	1/22/2009	BTO	$23.27
Baxter Intl	BAX	$0.89	$0.76	7.3%	1/22/2009	BTO	$53.56
Bb&T Corp	BBT	$0.53	$0.75	(3.0%)	1/22/2009	BTO	$20.99
Brinker Intl	EAT	$0.19	$0.31	0.0%	1/22/2009	BTO	$9.42
Cabot Microelec	CCMP	$0.06	$0.51	(21.7%)	1/22/2009	BTO	$22.33
Capital One Fin	COF	$0.39	$0.90	6.2%	1/22/2009	AMC	$25.47
Cdn Natl Ry Co	CNI	$0.85	$0.91	6.2%	1/22/2009	AMC	$34.45
Cit Group Inc	CIT	($0.39)	($0.69)	(11.8%)	1/22/2009	BTO	$3.24
City National	CYN	$0.62	$0.96	(11.0%)	1/22/2009	AMC	$37.08
Cobiz Finl Inc	COBZ	$0.16	$0.23	0.0%	1/22/2009	AMC	$7.89
Columbus Mckinn	CMCO	$0.41	$0.53	(11.3%)	1/22/2009	BTO	$13.04
Comerica Inc	CMA	$0.26	$0.77	57.1%	1/22/2009	BTO	$14.60
Commnty Bk Sys	CBU	$0.37	$0.39	0.0%	1/22/2009	AMC	$21.37
Cubist Pharm	CBST	$0.51	$0.16	29.4%	1/22/2009	AMC	$22.66
Cypress Semicon	CY	($0.31)	$0.10	(312.5%)	1/22/2009	BTO	$4.75
Deluxe Corp	DLX	$0.68	$0.77	(6.9%)	1/22/2009	BTO	$13.12
Digi Intl Inc	DGII	$0.03	$0.14	55.6%	1/22/2009	AMC	$7.47
Exelon Corp	EXC	$1.06	$1.02	(6.1%)	1/22/2009	BTO	$53.04
Ezcorp Inc Cl A	EZPW	$0.35	$0.29	0.0%	1/22/2009	AMC	$14.19
Federated Invst	FII	$0.51	$0.52	1.8%	1/22/2009	AMC	$18.26
Fifth Third Bk	FITB	$0.03	$0.07	(119.1%)	1/22/2009	BTO	$5.38
First Comw Finl	FCF	$0.16	$0.16	(22.2%)	1/22/2009	BTO	$10.17
First Finl Hldg	FFCH	$0.42	$0.36	8.0%	1/22/2009	BTO	$18.70
Franklin Resour	BEN	$0.86	$2.12	(12.2%)	1/22/2009	BTO	$52.97
Google Inc-Cl A	GOOG	$4.23	$3.79	3.9%	1/22/2009	AMC	$298.99
Huntington Banc	HBAN	$0.20	($0.65)	27.3%	1/22/2009	BTO	$4.29
Imation Corp	IMN	$0.13	$0.64	0.0%	1/22/2009	BTO	$12.96
Interactive Brk	IBKR	$0.54	$0.46	6.6%	1/22/2009	AMC	$18.08
Intl Game Tech	IGT	$0.27	$0.36	(9.7%)	1/22/2009	BTO	$12.45
Intuitive Surg	ISRG	$1.31	$1.24	13.4%	1/22/2009	AMC	$100.68
Itt Educational	ESI	$1.44	$1.20	11.3%	1/22/2009	BTO	$111.81
Janus Cap Grp	JNS	$0.05	$0.33	(7.7%)	1/22/2009	BTO	$6.74
Kelly Svcs A	KELYA	$0.12	$0.54	(74.1%)	1/22/2009	BTO	$11.92
Keycorp New	KEY	($0.02)	$0.06	(162.5%)	1/22/2009	BTO	$6.22
Knight Cap Gp	NITE	$0.37	$0.50	66.7%	1/22/2009	BTO	$15.85
Lockheed Martin	LMT	$1.89	$1.89	1.0%	1/22/2009	BTO	$79.48
Lsi Industries	LYTS	$0.02	$0.22	200.0%	1/22/2009	BTO	$6.89
M&T Bank Corp	MTB	$1.14	$1.52	(4.7%)	1/22/2009	BTO	$42.59
Matthews Intl-A	MATW	$0.48	$0.50	1.5%	1/22/2009	AMC	$34.55
Memc Elec Matrl	WFR	$0.62	$1.05	(9.8%)	1/22/2009	AMC	$14.11
Meredith Corp	MDP	$0.43	$0.73	2.5%	1/22/2009	BTO	$17.76
Microsoft Corp	MSFT	$0.49	$0.50	2.1%	1/22/2009	AMC	$19.24
Monro Muffler	MNRO	$0.28	$0.27	5.6%	1/22/2009	BTO	$24.14
Netscout Systms	NTCT	$0.16	$0.04	23.5%	1/22/2009	AMC	$13.77
Nokia Cp-Adr A	NOK	$0.39	$0.69	(15.4%)	1/22/2009	BTO	$14.05
Oceanfirst Finl	OCFC	$0.32	$0.26	(11.1%)	1/22/2009	AMC	$14.97
Old Rep Intl	ORI	($0.25)	($0.05)	(25.0%)	1/22/2009	BTO	$11.55
Peoples Utd Fin	PBCT	$0.13	$0.16	0.0%	1/22/2009	AMC	$16.65
Potash Sask	POT	$2.37	$1.16	10.7%	1/22/2009	BTO	$69.86
Sherwin William	SHW	$0.53	$0.88	18.1%	1/22/2009	BTO	$56.34
Smith (Ao) Corp	AOS	$0.24	$0.81	25.0%	1/22/2009	BTO	$31.61
Southwest Air	LUV	$0.07	$0.12	50.0%	1/22/2009	BTO	$8.28
Suntrust Bks	STI	$0.18	$0.02	(22.2%)	1/22/2009	BTO	$20.89
Synaptics Inc	SYNA	$0.50	$0.33	34.5%	1/22/2009	AMC	$20.60
Synovus Finl Cp	SNV	($0.44)	$0.28	(162.5%)	1/22/2009	AMC	$5.66
Taiwan Semi-Adr	TSM	$0.09	$0.20	0.0%	1/22/2009	BTO	$7.37
Tcf Finl Corp	TCB	$0.24	$0.50	(20.0%)	1/22/2009	BTO	$10.61
Technitrol Inc	TNL	$0.09	$0.52	(14.3%)	1/22/2009	AMC	$3.21
Twin Disc	TWIN	$0.25	$0.37	(52.2%)	1/22/2009	N/A	$6.70
Ucbh Hldgs Inc	UCBH	($0.08)	$0.19	(200.0%)	1/22/2009	AMC	$3.83
Union Pac Corp	UNP	$1.28	$0.93	6.2%	1/22/2009	BTO	$41.23
Unitedhealth Gp	UNH	$0.78	$0.92	0.0%	1/22/2009	BTO	$24.89
Valley Natl Bcp	VLY	$0.28	$0.22	(25.0%)	1/22/2009	BTO	$15.87
China Bak Batry	CBAK	$0.01	($0.02)	42.9%	1/23/2009	N/A	$1.68
Dime Comm Bncsh	DCOM	$0.25	$0.17	0.0%	1/23/2009	BTO	$12.45
Gatx Corp	GMT	$0.59	$0.62	35.7%	1/23/2009	BTO	$28.59
Genl Electric	GE	$0.44	$0.68	0.0%	1/23/2009	BTO	$13.77
Harley-Davidson	HOG	$0.58	$0.78	(10.1%)	1/23/2009	BTO	$13.95
Mb Financl Inc	MBFI	$0.27	$0.44	(11.6%)	1/23/2009	BTO	$21.34
Schlumberger Lt	SLB	$1.10	$1.11	2.4%	1/23/2009	BTO	$40.18
Webster Finl Cp	WBS	$0.18	$0.10	(37.0%)	1/23/2009	BTO	$9.80
Xerox Corp	XRX	$0.34	$0.41	0.00%	1/23/2009	BTO	$7.82

BMO = Before The Market Open, AMC = After Market Close

¹Some of the companies listed in the earnings calendar may not be in the Zacks Rank universe.

"NTCT" Free Stock Analysis: Buy? Sell? Hold?
"BNI" Free Stock Analysis: Buy? Sell? Hold?
"UTX" Free Stock Analysis: Buy? Sell? Hold?
"JNJ" Free Stock Analysis: Buy? Sell? Hold?
"IBM" Free Stock Analysis: Buy? Sell? Hold?
"GE" Free Stock Analysis: Buy? Sell? Hold?
"MSFT" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

U.S. Banks – Zacks Analyst Interviews

Zacks Market Commentaries — Fri, 26 Dec 2008 00:00:00 +0000

We continue to maintain a negative outlook on the U.S. Banks.

While the programs launched by the U.S. Treasury and the Federal Reserve to boost the capital levels and alleviate the liquidity problems have helped the capital and funding concerns to a great extent, the efforts have not succeeded in restoring the lending activity at banks. Lower lending activity will continue to hurt the margins though the low interest rate environment should be beneficial to the banks with a liability sensitive balance sheet.

During the current year, the banks have mainly suffered due to the losses in the mortgages and residential construction loans. As not much has been done so far to address the fundamental problems of declining home values and rising foreclosures and given the sharp increase in the level of unemployment, we anticipate continued losses in these portfolios.

Further, with the deterioration in the overall economic environment, we anticipate the losses will increase in all the other asset classes as well, especially in the commercial real estate loan and home equity loan portfolios. As a result of rise in charge-offs, the levels of reserve coverage has fallen over the past quarters and the banks will have to make higher provisions through FY09, hurting the profitability.

Opportunities

We currently do not see any opportunity and thus do not have a buy recommendation on any stocks within this industry.

Weaknesses

The banks with high exposure to housing and Commercial Real Estate loans like KeyCorp (KEY), Zions Bancorporation (ZION), and Comerica Incorporated (CMA) will continue to remain under pressure. We also maintain Sell recommendation on Freddie Mac (FRE), and Sallie Mae (SLM) as we anticipate rising losses and increased provisions through FY09.

"KEY" Free Stock Analysis: Buy? Sell? Hold?
"ZION" Free Stock Analysis: Buy? Sell? Hold?
"FRE" Free Stock Analysis: Buy? Sell? Hold?
"SLM" Free Stock Analysis: Buy? Sell? Hold?
"CMA" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

U.S. Banks

Zacks Market Commentaries — Wed, 24 Dec 2008 08:57:18 +0000

"ZION" Free Stock Analysis: Buy? Sell? Hold?
"KEY" Free Stock Analysis: Buy? Sell? Hold?
"FRE" Free Stock Analysis: Buy? Sell? Hold?
"CMA" Free Stock Analysis: Buy? Sell? Hold?
"SLM" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

KeyCorp (KEY) – Bear of the Day

Zacks Market Commentaries — Mon, 22 Dec 2008 00:00:00 +0000

KeyCorp (KEY) - KeyCorp's 3Q08 loss from continuing operations came in at $0.10 per share, substantially worse than the estimates. The lower-than-expected results mainly stemmed from a steep rise in loan loss provisions and an adverse impact of derivative contract losses.

However, positive trends were visible in some fee-based businesses and the expenses remained well controlled. Also, the Community Banking group continues to perform well. Credit quality was mixed during the quarter.

Though the company has taken steps to reduce its exposure to the Commercial Real Estate (CRE) home builders segment, we anticipate higher losses in CRE portfolio in the coming quarters in view of its sizeable exposure to risky markets. As such, we are maintaining our Sell rating on the shares of KEY, with a six-month price target of $7.50 per share.
"KEY" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

Fannie, Freddie Bailout Just a First Step – Zacks Analyst Interviews

Zacks Market Commentaries — Mon, 15 Sep 2008 00:00:00 +0000

With the first bit of distance from which to view the U.S. governments bailout of government-sponsored entities (GSEs) Fannie Mae (FNM) and Freddie Mac (FRE), we wanted to find out from Zacks senior finance industry analyst Neena Mishrahow much of a game-changer this is for the housing market, Wall Street overall and the U.S. economy as a whole.

What sort of immediate impact do you expect among financial companies in your coverage now that Fannie and Freddie will officially be bailed out?

The move was overall positive for the housing market and the wider economy, as it removed the uncertainty related to the government support of the GSEs, and is also likely to help bring mortgage rates down. Yet we do not expect it to lead to a recovery in the housing markets. The housing situation in the country continues to be quite grim as there is still a large supply of unsold homes in the market and an increasing number of foreclosures.

While the bailout will bring down the mortgage rates, we do not anticipate any significant increase in the buying activity in the housing markets, in view of high inflation, rising unemployment (now above 6%) and increased job losses. Further, since the banks continue to struggle with large amounts of problem assets on their balance sheets, their lending abilities will be limited and tighter lending and underwriting norms will also limit the lending activity. Thus, we also do not see housing prices stabilizing very soon.

Does this mark the beginning of a new direction in the U.S. finance business, mortgages, etc., or are there other big questions still out there?

We maintain our negative outlook on the banks and mortgage insurers and neutral outlook on the P&C and Health insurers. While we acknowledge that the GSE bailout was overall supportive for the markets, we do not see the housing markets bottoming out at present.

Many of the banks under our coverage will report higher losses, particularly related to the mortgage and residential construction portfolios, in the coming quarters. Same is the case with the mortgage insurers who will report increased losses in the U.S. mortgage operations. As a result, they will need to raise additional capital and/or eliminate/cut their dividends. We also anticipate losses related to some banks and insurers exposure to preferred stocks of the GSEs, which will likely need to be marked down.

Do you see any sub-sectors within your coverage trading at attractive valuations these days?

We suspect that the credit costs will remain elevated during the second half of 2008 and at least a part of 2009 and will continue to impact the earnings. Among the banks, we favor those which have low exposure to housing and residential construction loans and/or derive a significant portion of their earnings from fee based sources. Among the insurers also, we continue to prefer those which have superior capital levels and lower exposure to mortgage related securities in their portfolio, compared with their peers.

Are there Sells you would care to point out for investors to stay away from?

We would advise the investors to stay away from banks like National City Corp. (NCC), Wilmington Trust (WL), Zions Bancorp (ZION), Keycorp (KEY) and Comerica (CMA), and mortgage insurer PMI Group (PMI).

Neena Mishra is a senior analyst covering financial institutions and insurers for Zacks Equity Research.
"FNM" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

PPI Reflects Inflation Reality

Dirk Van Dijk — Tue, 19 Aug 2008 11:48:36 +0000

This morning, the government released the Producer Price Index (PPI), and its was ugly: It was up 1.2% in July (seasonally adjusted). 1.2% headline and 0.7% core vs consensus estimates of 0.6% and 0.2%. This follows a 1.8% jump in June and a 1.4% rise in May.Â Thus, over the last three months it is rising at an annual rate of 19.1%, a rate that is downright Argentinean.Â

The earlier stages of processing were even hotter. Prices received by manufacturers of intermediate goods moved up 2.7% in July versus 2.1% in the prior month, while prices for crude materials climbed 4.2% after a 3.7% in June.Â

Year-over-year gains were 9.8% headline -- the highest reading since 1981 (and then it was coming down, not heading up), while the 3.5% core (inflation ex inflation) was the most since '91.

Bottom line: Inflation is here, and these PPI numbers will bleed through to the CPI in then next few months, although after that, the recent decline in commodity prices should start to cool down inflation, at least on the headline level, but core prices should continue to rise.Â Â Combined with yet another very weak reading for housing starts and permits, and weekly unemployment claims well over the 400,000 level on a consistent basis, it looks like a textbook case of stagflation.Â Time to dust off those old Bee GeeÂ’s records, folks -- it looks like the 1970Â’s are back.

The Fed is caught between a rock and a hard place, and will most likely stay on hold through the end of the year.Â Expect interest rates on everything that is not super safe (a.k.a. a Treasury) to go up, and those only being held down by fear, not because they represent solid investment value.Â

This is not good for the banks and especially for the GSEÂ’s, Fannie Mae (FNM) and Freddie Mac (FRE).Â Most of the regional banks still have many more write-offs to come and will need to eliminate their dividends and raise very large amounts of new capital, which will be very dilutive to current shareholders.Â Avoid names like Zion (ZION), Keycorp (KEY), Comerica (CMA), National City (NCC) and Washington Mutual (WM).Â Bottom fishing will get you an old boot, not a tasty fish, these days.

Read the full analyst report on FRE

Read the full analyst report on ZION

Read the full analyst report on KEY

Read the full analyst report on CMA

Read the full analyst report on NCC

Read the full analyst report on WM

"FNM" Free Stock Analysis: Buy? Sell? Hold?
"FRE" Free Stock Analysis: Buy? Sell? Hold?
"NCC" Free Stock Analysis: Buy? Sell? Hold?
"WM" Free Stock Analysis: Buy? Sell? Hold?
"ZION" Free Stock Analysis: Buy? Sell? Hold?
"KEY" Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

High dividend stocks of S&P 500.

Vlada Kynsky — Sat, 05 Jul 2008 14:21:00 +0000

I run my fundamental stock screener searching stocks with the highest dividend yield. Report list only companies included in index S&P 500. Not surprisingly except one (GM) there are only financials and banks in top ten. The one of the highest yield was for financials compared to other sectors already before credit turmoils. And after deep fall we can see almost incredible yield over 30% for MBI.
I list below one more table. Just to show top 10 high dividend stocks purged from financials.

Top yielding stocks in S&P 500

Symbol	Company Name	Industry	Yield
(MBI)	MBIA Ord Shs	Titleinsur	33.58
(ACAS)	American Capital Strat.	ClFundDebt	18.36
(RF)	Regions Financial Corp	StheastBnk	14.74
(KEY)	Keycorp Ord Shs	MonCentBnk	13.51
(BAC)	Bank of America Ord Shs	MonCentBnk	11.43
(CMA)	Comerica Inc	MidwestBnk	10.7
(WB)	Wachovia Corp Ord Shs	MonCentBnk	10.08
(GM)	GENERAL MOTORS	AutoManu	9.88
(HBAN)	Huntington Ord Shs	MidwestBnk	9.65
(MI)	Marshal & Ilsley Ord Shs	MidwestBnk	9.05

High dividend S&P 500 stocks (banks and financials excluded)

Symbol	Company Name	Industry	Yield
(GM)	GENERAL MOTORS	AutoManu	9.88
(CZN)	Citizens Comms Ord Shs	TelecomDom	8.84
(Q)	Qwest Communications Intl	TelecomDom	8.51
(DDR)	Developers Diversified Realty	REITRetail	8.44
(WIN)	Windstream Corp	TelecomDom	8.3
(GCI)	Gannett Co Inc	PublshNews	8.16
(XL)	XL Capital Class A Ord Shs	PropInsure	7.65
(FNM)	Fannie Mae Ord Shs	Mtginv	7.46
(PFE)	Pfizer Ord Shs	MjrDrgManu	7.21
(RAI)	Reynolds American Inc	Cigarettes	7.19