Thursday, Friedman, Billings, Ramsey upgraded Financial Federal Corp. (FIF) shares to Market Perform from Underperform, while reiterating its price target of $18. The brokerage lowered its 2009 EPS estimate to $1.73 from $1.75, and its 2010 estimate to $1.39 from $1.60.
Analyst Scott Valentin upgraded the stock given his view that its robust balance sheet (24% equity-to-assets ratio), liquidity position, and relatively benign level of problem assets will help it weather the current credit crisis better than non-bank specialty lender peers.
The analyst said that the second round of the TALF program and President Obama's economic stimulus plan, at the margin, benefit FIF's prospects. The analyst continues to believe that the credit environment will remain challenging as was evident in the most recent quarter. FIF's 46% reserve coverage of nonaccruals is a lingering concern of the analyst; however, the strong capital position serves as an effective offset.
In the analyst's opinion, TALF enhances the liquidity outlook. It appears that the second phase of TALF will encompass asset types such as equipment and fleet leases and heavy equipment. FIF's strong capital position improves its competitive profile, in the analyst's opinion, and makes it a top candidate to benefit from the program.
The analyst said that liquidity, at quarter-end, increased to $429 million, leaving about $300 million after investors put the remaining $133 million of the 2% Convertible Senior Debentures, which are due in 2034, back to FIF in April 2009. Key upcoming debt maturities include $40 million of bank lines and a $225 million conduit facility due at April-end.
The analyst noted that Fitch Ratings, on March 2, affirmed FIF's long-term issued default rating at BBB+ with a stable outlook. The analyst's price target of $18 essentially equals second quarter of 2009 book value of $17.75, which he believes is an appropriate value for a company that is reasonably equipped to withstand the current credit cycle.
Currently, FIF is up $0.48 or 2.63% and trading at $18.70.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.