The Zacks Analyst Blog Highlights: Bank of America, Morgan Stanley, Goldman Sachs Group, JPMorgan Chase and Pfizer

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Feb 22, 2012, 09:30 ET

CHICAGO, Feb. 22, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Bank of America Corporation (NYSE: BAC), Morgan Stanley (NYSE: MS), Goldman Sachs Group Inc. (NYSE: GS), JPMorgan Chase & Co. (NYSE: JPM) and Pfizer Inc.'s (NYSE: PFE).

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Here are highlights from Tuesday's Analyst Blog:

No More Cash Bonus for BofA CEO

Bank of America Corporation (NYSE: BAC) CEO Brian Moynihan becomes the latest banking executive to take a pay cut. In the regulatory filings submitted to the Securities and Exchange Commission on Friday, BofA stated that its CEO will not get any cash bonus, and his annual salary of $950,000 will remain the same.

According to the filing, BofA CEO would receive 761,007 as restricted shares, which are worth nearly $5.92 million (based on the closing price of February 15), down approximately 35% from the 2010 levels. These restricted stocks are linked to the company's performance and some of these are payable in March 2015, at the earliest.

Of the total restricted stocks, the BofA CEO got 228,302 shares that will be vested in 12 monthly installments, starting from March 2012. These are worth $1.8 million based on the February 15 closing price. In 2010, he did not receive any bonus of this sort.

For the other part of the bonus, BofA CEO will be granted 532,705 shares, which will be eligible for payment after March 2015. These are worth $4.1 million based on the closing price of February 15. However, these restricted shares are based on the performance of the company, and the CEO is eligible to receive them only if certain financial criteria are fulfilled. Further, these restricted shares would expire in December 2016, if not earned by that time.

Back in 2010, similar performance based stocks were vested to the BofA CEO. However, the company was unable to meet the financial targets, and thereby the CEO did not receive the bonus. In 2011, the company had to face many hurdles as the overall condition of the banking sector was miserable due to various problems including slow economic growth and the Euro-zone debt crisis. These further compounded the company's overall weak financial condition.

Over the last several quarters, BofA has been selling a number of non-core assets and unprofitable divisions to boost its capital levels and streamline operations. Further, to stabilize revenues and reduce the operating costs, the company also announced that it would trim nearly 30,000 of its workforce by 2013.

We can say that after taking all these initiatives, BofA is currently in a better position than it was a year ago. However, the company should not become complacent with this mere development and strive for further improvement in its capital base.

Getting back to the pay structure story, other BofA senior executives were also provided with bonuses, similar to that of the CEO. The co-chief operating officer (COO) of the company, Thomas Montag will get a total of $8.1 million in restricted shares, down from $14.3 million granted in 2010.

Similarly, the other co-COO, David Darnell was granted up to $4.2 million in shares depending on the performance of the company. The senior managers' bonuses were lower than 2010 levels and performance based incentive formed the major portion of bonuses.

Amid an economic slowdown, many of the senior banking executives have been facing a pay slash. Apart from BofA, some other large U.S. banks such as Morgan Stanley (NYSE: MS) and Goldman Sachs Group Inc. (NYSE: GS) are also trimming the compensation of their CEOs. However, the CEO of JPMorgan Chase & Co. (NYSE: JPM) still has the benefit of a steady pay structure.

Currently, BofA retains a Zacks #3 Rank, which translates into a short-term Hold rating. Also, considering the fundamentals, we maintain a long-term Neutral recommendation on the stock.

FDA Accepts Pfizer Drug NDA

The US Food and Drug Administration (FDA) recently accepted Pfizer Inc.'s (NYSE: PFE) New Drug Application (NDA) for tafamidis meglumine. Pfizer is looking to get tafamidis approved for transthyretin familial amyloid polyneuropathy (TTR-FAP).

Tafamidis became a part of Pfizer's portfolio with its October 2010 acquisition of FoldRx. TTR-FAP is a progressively fatal genetic neurodegenerative disease.

Tafamadis, which gained approval in the EU in November 2011, faced a setback last year in the US when the FDA issued a "refusal to file" letter for the company's new drug application for the candidate. At that time, the FDA had said that the application, which was submitted in Feb 2011, was incomplete.

Pfizer gained priority review status for tafamadis which means a response from the FDA should be out in June 2012. Tafamadis enjoys orphan drug status in both the US and the EU. It is estimated that about 8,000 people across the world suffer from TTR-FAP. With tafamadis targeting a small patient population, we do not expect significant sales from the product.

Neutral on Pfizer

We currently have a Neutral recommendation on Pfizer, which carries a Zacks #3 Rank (short-term "Hold" rating). The company is going through a challenging phase following the November 2011 patent expiry of its mega blockbuster cholesterol treatment, Lipitor.

Near-term earnings at Pfizer will be driven by cost cutting efforts and share repurchases. While Wyeth brings with it an attractive biologics platform and some complementary products and businesses, we do not believe they are enough to sustain long-term top-line growth. We see the merger as mostly an opportunity for Pfizer to cut additional costs. Longer-term growth will be dependent on the success of drug development.

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