Wednesday, October 04, 2006

Calls of Note Part 1

- Keefe, Bruyette & Woods' Lauren Smith is adjusting her mid-cap broker estimates in front of 3Q earnings. Biggest downward changes to 3Q are for COWN/ TWPG due to soft equity underwriting in 3Q. Fine-tuning Piper 3Q estimate lower largely due to lower equities revenue. Modestly increasing Jefferies estimates on stronger M&A performance. Raymond James and Greenhill estimates are unchanged.

Ms. Smith is lowering her Q306 EPS estimate for Cowen (NASDAQ:COWN) from $0.14 to $0.06 given what has proven to be a very weak quarter for investment banking, in particular equity underwriting as well as private placement activity. She has also therefore fine-tuned her capital markets assumptions given the lower underwriting activity. As such firm's full year 2006 estimate decreases from $1.02 to $0.93. 2007 estimate remains unchanged at $1.30 at this time.

Investment banking activity is weaker than originally forecast though she points to what seemingly remains a pretty healthy pipeline of activity. She is forecasting investment banking revenues of $29.8 mil compared to $39.5 mil. in the prior quarter. Ms. Smith estimates from secondary data sources that the company was on half the number of private placement transactions this quarter versus last; the company ultimately finished the quarter lead manager on just two deals (one an IPO) and co-manager on just three deals
versus 9 in the prior quarter.

Notablecalls: KBW's 06 EPS est for COWN is now almost 15% below consensus. Would not be surprised to see some weakness today.

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