Zacks Bull and Bear of the Day Highlights: AMERCO, AGL Resources, Morgan Stanley, Prudential Financial and MetLife
CHICAGO, May 10, 2012 /PRNewswire/ -- Zacks Equity Research highlights AMERCO, Inc. (Nasdaq:UHAL) as the Bull of the Day and AGL Resources, Inc. (NYSE:GAS) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Morgan Stanley (NYSE:MS),Prudential Financial Inc. (NYSE:PRU) and MetLife Inc. (NYSE:MET).
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Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
AMERCO, Inc. (Nasdaq:UHAL) is the parent company of U-Haul International, the world's largest consumer truck rental company. It is also the second largest self-storage company in North America.
The impact of the decline in housing and a decrease in apartment occupancy rates appears to have ended. We expect continued improvements in operating parameters. Our recommendation continues as Outperform, with a price target of $110 a share.
Based on our estimates for the next four quarters' EBITDAL of $40 a share, we would expect a price range of $95 to $125. The stock has reached our low end target price and we continue to rank the stock Outperform.
We are maintaining our Underperform recommendation on AGL Resources, Inc. (NYSE:GAS) with a target price of $35. We expect shareholder sentiment toward the company to remain lukewarm, considering its investment in higher-risk unregulated operations, ongoing regulatory uncertainties and the challenging economic environment.
AGL's earnings are likely to suffer in 2012 due to a less-than-favorable outlook at its wholesale segment. Additionally, the inclusion of the shipping operations (post Nicor acquisition) has left AGL with a weak business, thereby heightening its risk profile. Partially offsetting these negatives are the company's large and stable customer profile, consistent dividend growth and strong liquidity position.
Considering these factors, we see little reason for investors to own the stock and therefore maintain our Underperform recommendation. Our $35 price objective reflects a 2012 P/E multiple of 12.7x.
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Morgan Stanley in New Mortgage Mess
Allegations against Morgan Stanley (NYSE:MS) over the sale of mortgage-backed securities are far from over. Recently, one of the top U.S. life insurers, Prudential Financial Inc. (NYSE:PRU), has brought up charges against Morgan Stanley for the sale of $1 billion in residential mortgage-backed securities that the former had bought, according to a Bloomberg report.
The company has been accused of making false statements as well as omitting material facts prior to Prudential's purchase of the residential mortgage-backed securities which were issued with 41 mortgage-loan securitizations between July 2004 and August 2007.
Prudential alleged that Morgan Stanley had wrongfully asserted that underwriting standards for the mortgages were met and home loans were lawfully assessed. However, a significant part of the mortgage loans, which backed those securities defaulted, were foreclosed or became delinquent.
As a result, the value of these securities plummeted and Prudential incurred significant losses on its investments in such securities which exceeded $350 million. Prudential is claiming for both compensatory as well as punitive damages.
Recent Allegations
Morgan Stanley has encountered similar allegations in the recent past. The company has faced lawsuits from companies such as Asset Management Fund and MetLife Inc. (NYSE:MET) which accused Morgan Stanley of fraudulent activities including misrepresentation of facts over the sale of securities.
Asset Management Fund has sued the company over its $122.4 million purchase of residential mortgage backed securities. On the other hand, MetLife has brought forth charges against Morgan Stanley over its acquisition of $757 million in residential mortgage-backed securities in 2006 and 2007.
Moreover, in April, Morgan Stanley has been asked by the Federal Reserve to review the foreclosures made by Saxon mortgage servicer prior to the unit's sale and subsequently reimburse the affected borrowers.
In Conclusion
The role of residential mortgage backed securities behind the recent financial crisis and the fraudulent activities related to the sale of such instruments have been severely criticized. In fact, several of the Wall Street biggies are stuck with similar allegations. Their code of conduct with respect to the sale of such instruments has been questioned.
We believe that these lawsuits further increase the company's litigation risk and also represent a threat to scathe the company's financials to some extent. However, if proved or settled, the investors can breathe some relief.
Currently, the shares of Morgan Stanley have a Zacks #3 Rank, which translates into a short-term Hold rating. Additionally, considering the fundamentals we maintain our long-term Neutral recommendation on the stock.
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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