Merrill Lynch calling for a bottom in Ferts:
Temporary buyers strike largely priced in We believe fertilizer fundamentals are nearing a bottom, given nitrogen and phosphate prices have already plunged through breakeven margins for marginal producers, triggering significant shuttered global capacity. The significant deferral in fertilizer applications that occurred this fall can not repeat in the spring if crops are to be planted. We are raising our EV/EBITDA valuation multiples for each nutrient by one multiple point (nitrogen from 2 to 3, phosphate from 3 to 4, and potash from 4 to 5), which are still well below historical levels. Our ratings on POT, MOS, IPI, and TRA are raised to Buys, CF is raised to a Neutral, and AGU remains an Underperform, largely due to a potential large inventory devaluation in its retail business.
FBR initiates Bank of America (NYSE:BAC) with Underperform and $9 tgt:
We reinitiate coverage of Bank of America Corporation (BAC) at Underperform with a $9.00 price target, equal to 0.6x pro forma tangible book value of $15.50. Our chief concern is Bank of America's thin tangible common equity. We calculate a tangible common equity ratio of just 3.15% (including its October capital raise, the acquisition of Merrill Lynch, and TARP warrants), which is just too low. While Bank of America's capital will be rebuilt over time, we expect that it will have to raise a substantial amount of new common capital to jumpstart the process, which will dilute existing shareholders. We recommend that investors stay away from the stock until this initial raise is complete. Our 2009 operating EPS estimate of $2.00 is well below the consensus estimate of $2.61, which we attribute largely to continued, elevated provision expense.
Notablecalls: Ferts will react to MLCO upgrades. BAC..I see a 30-40c move to the downside at best today.
Temporary buyers strike largely priced in We believe fertilizer fundamentals are nearing a bottom, given nitrogen and phosphate prices have already plunged through breakeven margins for marginal producers, triggering significant shuttered global capacity. The significant deferral in fertilizer applications that occurred this fall can not repeat in the spring if crops are to be planted. We are raising our EV/EBITDA valuation multiples for each nutrient by one multiple point (nitrogen from 2 to 3, phosphate from 3 to 4, and potash from 4 to 5), which are still well below historical levels. Our ratings on POT, MOS, IPI, and TRA are raised to Buys, CF is raised to a Neutral, and AGU remains an Underperform, largely due to a potential large inventory devaluation in its retail business.
FBR initiates Bank of America (NYSE:BAC) with Underperform and $9 tgt:
We reinitiate coverage of Bank of America Corporation (BAC) at Underperform with a $9.00 price target, equal to 0.6x pro forma tangible book value of $15.50. Our chief concern is Bank of America's thin tangible common equity. We calculate a tangible common equity ratio of just 3.15% (including its October capital raise, the acquisition of Merrill Lynch, and TARP warrants), which is just too low. While Bank of America's capital will be rebuilt over time, we expect that it will have to raise a substantial amount of new common capital to jumpstart the process, which will dilute existing shareholders. We recommend that investors stay away from the stock until this initial raise is complete. Our 2009 operating EPS estimate of $2.00 is well below the consensus estimate of $2.61, which we attribute largely to continued, elevated provision expense.
Notablecalls: Ferts will react to MLCO upgrades. BAC..I see a 30-40c move to the downside at best today.
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