Hold-Rated Barclays Target Lowered
An update has come out on Barclays PLC (BCS), in which senior banking sector analyst Ann H. Heffron, CFA is restating her Hold rating on the company. We excerpted the following details:
'We are maintaining our Hold on Barclays PLC, but reducing our target price to $45. In its third quarter trading update issued on November 27, Barclays announced that it expects 2007 results to be in line with market consensus after £1.3 billion in sub-prime-related credit write-downs at Barclays Capital taken in the third and fourth quarters to date. We are reducing our diluted EPADS estimates to $5.28 from $5.98 for 2007 and to $5.59 from $6.52 for 2008 to reflect problems in the US sub-prime market.
'While earnings should benefit from improved operating efficiency and better control over impairment charges, turmoil in the US sub-prime mortgage market should continue to take its toll at Barclays Capital. On October 5, Barclays withdrew its bid for ABN AMRO (ABN) and restarted its share repurchase program. Barclays increased its interim dividend 10%. Currently, Barclays is trading at 7.3X the consensus earnings estimate for 2007 and 6.7X the 2008 consensus estimate.
'These are well below the industry median P/E ratios of 11.0X and 10.4X, respectively, also based upon consensus estimates. While Barclays's estimated future growth is below the industry median, Barclays's attractive 6.5% dividend yield should provide support for the stock price. Our price target of $45 represents approximately an 8X P/E multiple of 2008 estimated earnings of $5.59 per ADS, providing a PEG ratio (P/E divided by estimated future growth rate) of 1.0X, roughly in-line with the industry.'
Halliburton Keeps On Profiting
An update has just come out today on Halliburton Company (HAL), in which Zacks oil industry analyst Sheraz A. Mian maintains his Buy rating on the company. We excerpted the following details:
'The KBR Inc. (KBR) spin-off and an increased push into the Eastern Hemisphere through a headquarters in Dubai are both positive developments. The spin-off of the high-volume, low-margin KBR business removes distractions and improves operational focus.
'Halliburton is a pure-play on the oilfield service market. We believe this will aid valuation by narrowing down, if not altogether eliminating, its valuation discount relative to Schlumberger (SLB) and other large-cap peers.
'Our Buy recommendation remains unchanged as we continue to view Halliburton as a core oilfield service holding. Despite some recent gains, Halliburton shares continue to trade at a significant valuation discount to its peer group. While the company, no doubt, has substantial exposure to North American natural gas through its market-leading pressure-pumping business, its international leverage and presence appear to be under-appreciated.
'The award of a major multi-year Saudi Aramco project highlights the strength of its international relationships, which we believe will get greater attention.
