An update has come out on Barclays PLC (BCS), in which senior banking sector analyst Ann H. Heffron, CFA is restating her Hold rating on the company. We excerpted the following details:
'We are maintaining our Hold on Barclays PLC, but reducing our target price to $45. In its third quarter trading update issued on November 27, Barclays announced that it expects 2007 results to be in line with market consensus after £1.3 billion in sub-prime-related credit write-downs at Barclays Capital taken in the third and fourth quarters to date. We are reducing our diluted EPADS estimates to $5.28 from $5.98 for 2007 and to $5.59 from $6.52 for 2008 to reflect problems in the US sub-prime market.
'While earnings should benefit from improved operating efficiency and better control over impairment charges, turmoil in the US sub-prime mortgage market should continue to take its toll at Barclays Capital. On October 5, Barclays withdrew its bid for ABN AMRO (ABN) and restarted its share repurchase program. Barclays increased its interim dividend 10%. Currently, Barclays is trading at 7.3X the consensus earnings estimate for 2007 and 6.7X the 2008 consensus estimate.
'These are well below the industry median P/E ratios of 11.0X and 10.4X, respectively, also based upon consensus estimates. While Barclays's estimated future growth is below the industry median, Barclays's attractive 6.5% dividend yield should provide support for the stock price. Our price target of $45 represents approximately an 8X P/E multiple of 2008 estimated earnings of $5.59 per ADS, providing a PEG ratio (P/E divided by estimated future growth rate) of 1.0X, roughly in-line with the industry.'
Read the full analyst report on BCS.
Read the full analyst report on ABN.
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