Friedman, Billings, Ramsey & Co. reiterates underperform

Friedman, Billings, Ramsey & Co. analyst Scott Valentin said on May 19 that Amex's plans to slash 4,000 jobs and reduce expenses by $800 million during the remainder of the year -- the second round of cost reduction measures in three quarters -- should help improve net income. In October, American Express announced a program to cut costs by $1.2 billion and cut 7,000 jobs.

Despite the cost-cutting measures and an expected boost to earnings, Valentin reiterated his underperform rating on the stock because of near-term worries such as rising loan losses. And, even with increased profits, earnings will still fall below levels seen before the credit crisis and recession began.

Valentin noted that the expense-reduction plan could boost earnings per share by 45 cents in 2009 and as much as 67 cents in 2010. In a research note, he said his estimates were now under review.

Avon Products (AVP)

BMO Capital Markets upgrades to market perform from underperform

BMO Capital Markets analyst Connie Maneaty noted on May 19 that the company signed up 1 million new representatives in the first quarter. She also said the company should offer more details of its $300 million to $400 million restructuring program when it reports second-quarter results. The restructuring is expected to cut costs by $200 million a year by 2013.

Still, Maneaty warns that sales are likely to worsen. "Avon expects organic sales to slow owing to the severe recession," the analyst wrote in a research note to investors. She dropped her estimate of 2009 operating profit by 6 cents to $1.45 and assumes a 6.5% sales decline.

In the second, third and fourth quarters, Maneaty expects profit of 31 cents, 33 cents and 57 cents, respectively.

The analyst lowered the second- and third-quarter estimates, in part because higher prices will not be enough to close a deficit from unfavorable currency comparisons.

eHealth Inc. (EHTH)

Oppenheimer downgrades to underperform from perform

Oppenheimer analyst Carl McDonald said on May 19 that eHealth stock does not appear to be discounting risk from health reform this year, particularly the pressure a health insurance exchange would have on individual broker commissions and margins. McDonald also noted that Internet traffic data for the first two months of the second quarter has been weak, suggesting little potential for earnings upside in the quarter.

McDonald said details around health reform should emerge over the next 45 days, and while a worst-case government-run health plan isn't likely, a health insurance exchange is a much higher probability. He cut his $16 price target on eHealth to $14.

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