For Immediate Release
Chicago, IL – March 2, 2012 – Zacks Equity Research highlights:
Texas Capital Bancshares ( TCBI) as the Bull
of the Day and KB Home ( KBH) as the Bear of
the Day. In addition, Zacks Equity Research provides analysis on
State Street Corporation ( STT),
Deutsche Bank AG ( DB) and Bank of America
Corporation ( BAC).
Full analysis of all these stocks is available at
http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
Bull of the Day:
We are upgrading our recommendation on Texas
Capital Bancshares ( TCBI) to Outperform from Neutral
following a better-than-expected fourth quarter 2011 earnings
result which was backed by an increase in net interest income. The
improvements in the credit quality metrics were also quite
impressive.
Texas Capital's business model remains a chief growth driver.
Additionally, the gain in market share from its competitors as well
as organic growth augurs well. The company's efforts to hire
experienced bankers and expand its presence are encouraging.
Though the resultant expenses that continue to grow remain a
concern, going forward we believe that with an eventual improvement
in the Texan economy, the company would be further poised to
experience an increase in earnings. Our six-month target price of
$39.00 equates to 16.6x our earnings estimate for 2012. This price
target implies an expected total return of 18.7% over that
period.
Bear of the Day:
KB Home ( KBH) faces a fragile housing
market. Increased availability of housing alternatives may keep the
company's earnings under pressure. Furthermore, the company's
housing market is highly concentrated, which poses threats to its
earnings performance.
The company did post a profit of $0.18 per share during the
fourth quarter of fiscal 2011, which was much higher than the Zacks
Consensus Estimate of $0.03. Nevertheless, the negative factors
have led us to downgrade the recommendation on shares of KB Home
from Neutral to Underperform with a target price of $10.00.
Our long-term Underperform recommendation on the stock indicates
that it will perform lower than the overall market. Our $10 target
price, 25.0X our 2013 EPS estimate, reflects this view.
Latest Posts on the Zacks Analyst Blog:
State Street Fined for Failed CDO
State Street Corporation ( STT) has been
penalized by Massachusetts state regulators for its alleged role in
marketing and selling risky collateralized debt obligation (CDO)
without disclosing proper information to its clients. The company
has been asked to pay a total of about $5 million ($3.54 million as
fees and profits earned on the deal and $1.45 million as
penalty).
In 2006, as an investment manager for a CDO, known as Carina CDO
Ltd., State Street was helped by Magnetar Capital LLC, a hedge fund
in selecting the assets that were included in the CDO. In addition
to this, the company was approached by Deutsche Bank
AG’s ( DB) Deutsche Bank Securities unit to market and
sale the CDO.
However, Magnetar had placed a bet that some of the assets that
were included in the CDO would fail and State Street failed to
inform the investors who bought the CDO about this predicted mess.
Thus, the investors failed to make an informed investment decision
as they were unaware of the conflict of interest between Magnetar
and other Carina investors.
State Street allegedly harmed the investors by leaving them with
a loss of nearly $450 million when Carina failed. However, at this
moment, State Street is neither admitting nor denying the findings
of the Massachusetts regulators or the conclusions regarding
information contained in the offering documents for the CDO.
Massachusetts state regulators have been trying to find out how
the banks structured and sold a large number of debt products,
prior to the financial crisis in 2008. Last month, Massachusetts
regulators stated that they were investigating
whether Bank of America Corporation (
BAC) had knowingly inflated the value of assets in two loan
portfolios that were sold to the investors in the form of
collateralized loan obligations. These loan portfolios led to
nearly $150 million of losses to the investors.
Conclusion
We believe that by penalizing State Street, Massachusetts
regulators have shown that financial institutions are liable for
fines if they do not disclose correct information to the investors.
Moreover, the inquiries and fines will lead to proper disclosures
of the loan values and other debts by the banks and other financial
institutions, which they sell to the investors.
Currently, State Street retains a Zacks #3 Rank, which
translates into a short-term ‘Hold’ rating.
Get the full analysis of all these stocks by going to
http://at.zacks.com/?id=2649.
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two
stocks that are likely to outperform (Bull) or underperform (Bear)
the markets over the next 3-6 months.
About the Analyst Blog
Updated throughout every trading day, the Analyst Blog provides
analysis from Zacks Equity Research about the latest news and
events impacting stocks and the financial markets.
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BANK OF AMER CP (BAC): Free Stock Analysis Report
DEUTSCHE BK AG (DB): Free Stock Analysis Report
KB HOME (KBH): Free Stock Analysis Report
STATE ST CORP (STT): Free Stock Analysis Report
TEXAS CAP BCSHS (TCBI): Free Stock Analysis Report
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