The Zacks Analyst Blog Highlights: JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and DTE Energy

Feb 15, 2013, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Feb. 15, 2013 /PRNewswire/ -- 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 JPMorgan Chase & Co. (NYSE: JPM), Bank of America Corporation (NYSE: BAC), Citigroup Inc. (NYSE: C), Wells Fargo & Company (NYSE: WFC) and DTE Energy Company (NYSE: DTE).


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Here are highlights from Thursday's Analyst Blog:

Foreclosure Activity Diminishing

Signaling a revival of the housing market, the foreclosure market report released by RealtyTrac revealed a fall in the overall foreclosure activity in Jan 2013. As per this leading online marketplace of foreclosure properties, foreclosure filings plunged 7% from Dec 2012 and 28% from Jan 2012. This brought the aggregate number of properties receiving default, auction or repossession notices to 150,864.

Foreclosure starts – default notices issued and foreclosure auctions (depending on the state's foreclosure procedure) – declined 11% from Dec 2012 and 28% from Jan 2012 to 64,773 properties in the reported month. This was the lowest level since Jun 2006. The primary reason for the drop was a significant fall in issuance of notice of defaults in California as new regulations on mortgage servicers were put in place in Jan 2013.

Likewise, bank repossessions (REOs) dipped 5% from the prior month and 24% from the last-year month to 50,453 properties. This was the lowest level since Feb 2008.

The top 10 states with the highest foreclosure rates were Florida, Nevada, Illinois, Arizona, Georgia, Ohio, Washington, California, Indiana and Michigan.

Moreover, the drop in overall foreclosure activity was a result of the switching of mortgage servicers and the government to other options to prevent foreclosures. Yet, the dip in foreclosures is expected to be at an uneven pace, as processes that are being used in handling these vary from state to state.

Foreclosure activity is expected to rise in the judicial states as the states have substantial backlogs to clear. Further, as the major lenders – JPMorgan Chase & Co. (NYSE: JPM), Bank of America Corporation (NYSE: BAC), Citigroup Inc. (NYSE: C), Ally Financial Inc. and Wells Fargo & Company (NYSE: WFC) – adjust to the new rules set under the National Mortgage Settlement as well as several other laws, foreclosure activity is bound to rise in the subsequent months.

Yet, we believe that the gradually stabilizing housing sector is likely to aid homeowners to avoid foreclosures in the near term. Also, the rate at which properties are entering the foreclosure procedure is expected to trend down gradually, thereby lifting the housing prices going forward. Moreover, the housing market will get an opportunity to regain a solid foothold if there are sufficient buyers for these properties.

DTE Energy Upgraded to Outperform

We have upgraded DTE Energy Company (NYSE: DTE) ahead of its fourth quarter earnings release to Outperform. Our bullish stance is based on its stable and growing utilities and its complementary non-utility businesses. Going forward, the growth momentum will be maintained by beneficial regulatory policies in Michigan, higher authorized rates for its regulated business, growth opportunities in its un-regulated businesses and an industry-high dividend yield.

Why the Upgrade?

DTE Energy's regulated electric and gas utilities in Michigan generate a relatively stable and growing earnings stream. Also, a constructive regulatory environment in Michigan will aid in earnings growth. The Michigan Public Service Commission (MPSC) allows the company's rate case request to be based on a forward test year in contrast to a historical test year as in other parts of the country. The MPSC has provided for an uncollectible expense tracking mechanism that helps in mitigating the impacts of unfavorable economic trends and a revenue decoupling mechanism that addresses changes in average customer usage. These techniques would lead to lower earnings volatility in the future.

Other Positives

DTE Energy is focused on improving its cost structure and directing capital investments toward renewable generation, utility infrastructure and environmental compliance assets. A focus on cost structure and operational improvements will help the utility attain a 5% – 6% long-term EPS growth target and shareholder return in the range of 9% to 10%. Improvement in the cost structure will also come in good stead as it will reduce the hike in customer bills.

DTE Energy has invested significantly in its non-utility businesses that diversify risk. Also, it has more growth opportunities in the Gas Storage and Pipelines and Power and Industrial Projects segments.

DTE Energy is looking for opportunities to monetize properties in 2013 as well as to optimize the productivity of the wells. It has rights to monetize shallow reserves above the Barnett Shale, specifically the Marble Falls formation. These drilling efforts have led to a large discovery of oil and high Btu gas that will add value to the asset base.

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