We are continuing with our Hold rating on Nomura Holdings, Inc. (NMR). Nomura reported fiscal third quarter (December 31) net earnings of 22.6 billion yen, below our estimate, largely due to a 12.2 billion yen loss in global merchant banking from valuation losses. Pretax earnings in global markets and global investment banking improved sequentially from a very weak second quarter that was hurt by write-downs and restructuring charges in the U.S. residential mortgage-backed securities business (US RMBS).
Domestic retail and asset management felt the effects of the stock market decline as domestic client assets fell by 3 trillion yen and brokerage commissions slumped. We are slashing our fiscal year (March 31) EPADS estimates to $0.55 from $0.75 for 2008 and to $0.70 from $1.15 for 2009, due to lingering effects of problems in the U.S. sub-prime and other credit markets.
Nomura Holdings is trading at 13.7x the consensus estimated EPADS for the fiscal year ending March 31, 2009, 61% above the financial sector median of 8.5x, based upon consensus estimates. We believe the shares are fully valued and see limited upside. Our target price of $18 represents a P/E multiple of roughly 25¾x our 2009 EPADS estimate of $0.70.
Read the full analyst report on NMR.
Get real-time market insights and profitable stock recommendations from the team of analysts at Zacks Equity Research. See all todays Analyst Blog entries on Zacks.com.