Friday, Friedman, Billings, Ramsey upgraded Webster Financial Corp. (WBS) shares to Market Perform from Underperform and increased its price target to $8 from $6. However, the brokerage narrowed its 2009 loss per share estimate to $1.40 from $1.75, and its 2010 loss estimate to $0.50 from $0.90.
Analyst Bob Ramsey upgraded the stock and increased price target given improvement in its capital following its relatively successful preferred and TRUPs tender offer. The tender attracted significantly more investor interest than the analyst expected.
The analyst said that his revised price target equals 0.6x pro forma tangible book, although he expects continued losses to reduce tangible book a couple of more dollars before reaching its trough.
The analyst said that credit remains his chief concern, with the $1.0 billion equipment finance portfolio, $660 million asset-based lending portfolio, $236 million liquidating portfolios, and $155 million resi development portfolio at the top of the list, followed closely by the $1.7 billion commercial loan portfolio.
The analyst narrowed his operating loss per share estimates to reflect the 11.28 million increase in shares outstanding, offset by the $17.7 million after-tax reduction in annual dividend/interest expense. While gains on the extinguishment of the TRUPs and preferred securities will impact the GAAP income statement, the analyst has not included those items in his operating loss estimates.
The analyst has also moved the estimated $7.7 million FDIC special assessment expense ($0.09 per share) into second quarter of 2009 (he previously modeled this in third quarter of 2009), which some Street analysts may exclude from operating earnings.
Currently, WBS is up $0.71 or 9.75% and trading at $7.99.
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