Analysts comment on Freddie Mac's 3Q results, capital concerns

Analysts comment on Freddie Mac's 3Q results, capital concerns

	Published : Tue, 20 Nov 2007 20:47 By : Agencies Print this Story

SAN FRANCISCO (Thomson Financial) - Some Wall Street analysts turned negative on Freddie Mac after the company said it recorded a $2 billion third-quarter loss and that it was considering ways to raise capital in the have ry near term,' while some others were able to see a silver lining.

Analyst Howard Shapiro at Fox-Pitt Kelton downgraded the government-sponsored enterprise to underperform from outperform. Fox-Pitt did not issue a target price on Freddie Mac.

Standard & Poor's cut its equity rating on Freddie Mac's stock to sell from hold, and its target price for to $24 from $49.

At Merrill-Lynch, Analyst Kenneth Bruce said Freddie Mac's loss was 'larger than expected' and forecast a negative market reaction to the reported results because the 'actual financial pressure is larger than we think anticipated by the market.'

Morgan Stanley rated Freddie Mac at equal-weight and said its third-quarter per-share net loss of $3.29 was close to Morgan Stanley's estimate of $3.01. But analyst Kenneth A. Posner in a research note: 'As we head into 2008, we can imagine the stock bottoming once credit spreads stabilize, and rallying once investors have visibility into 2009.'

Miller Tabak & Co. reiterated its strong buy rating for the GSE and 2009 price target of $77.72.

Analyst Tom Mitchell said that Freddie Mac was 'getting far ahead of the curve on loss provisions,' and that the company put up reserves about $550 million more than the expected run-rate of future maximum net charge-offs.

Shares in the mortgage purchasing organization were trading at $27, down 28% from Monday's closing price of $37.50. The stock hit a low of $24.31 in intraday trading, the lowest price seen since October 1996.

Prior to Tuesday's open, said it lost $2 billion, or $3.29 a share, in the quarter ending Sept. 30. The company also said it was considering cutting its dividend in half in an effort to raise capital.

Brigid Gaffikin

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