For Immediate Release
Chicago, IL – November 8, 2012 – 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 Wells Fargo & Company , Bank of America Corporation , Citigroup, Inc. , JPMorgan Chase & Co. and AAR Corp. .
Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513
Here are highlights from Wednesday’s Analyst Blog:
Wells Fargo to Forgo Interest Income
Wells Fargo & Company is all set to lose significant amount of interest income in the coming years due to refinancing the mortgages arising out of the foreclosure settlement. The company stated this in its most recent quarterly filing.
Wells Fargo will be refinancing the mortgages of around 33,000 to 36,000 borrowers, having an unpaid principal balance to the tune of about $6.7–$7.4 billion. As a result, the company anticipates reduction in interest income in the range of $1.8– $2 billion ($181–$200 million annually), which is $300 million higher than the prior estimates.
Further, based on mix of loans to be refinanced, Wells Fargo expects a 270 basis points dip in the weighted average note rate and weighted average remaining life of these loans is anticipated be 10 years. However, the actual number of borrowers opting for refinance will definitely affect these estimates.
Under the refinance program, Wells Fargo is entitled to earn an additional 25% credit for all refinance credits earned in the first year of the program. If the company achieves the target, it will earn an extra credit of up to $350–$390 million. Moreover, the company anticipates total earned credit from this program to be approximately $1.7–$2.0 billion.
The forgoing of interest income stems from the agreement that Wells Fargo, along with Bank of America Corporation , Citigroup, Inc. , JPMorgan Chase & Co. and Ally Financial Inc., reached with the attorneys general of 49 states and several federal agencies in February this year, over alleged faulty foreclosure practices. The total settlement amount was $25 billion.
Wells Fargo’s settlement share of $5.3 billion includes $900 million in a refinance program, $3.4 billion in consumer relief programs and $1.0 billion in foreclosure assistance payment to the Federal government and the states.
Wells Fargo expects the impact from the interest income loss to be spread across several years. The company anticipates the low interest income to negatively impact the net interest margin, which is already pressurized in the low interest rate scenario. As of September 30, 2012, NIM stood at 3.66% compared with 3.84% in the prior-year period. Also, the refinance program is expected to reduce the fair value of the loans refinanced in the region of $1.4 billion to $1.6 billion.
Yet, we believe that robust capital levels, prudent expense management as well as improvement in credit quality, albeit at a slow pace, will support Wells Fargo’s financials going forward. Further, stress test clearance and sound capital deployment activities will boost investors’ confidence in the stock.
Wells Fargo currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we also maintain a long-term Neutral recommendation on the shares.
AAR Corp.'s Airlift Service Renewed
AAR Corp. , one of the top contractors of aerospace, defense products and services in the world, declared that it has been selected by U.S. Transportation Command (USTRANSCOM) to continue its airlift support services for the U.S. Department of Defense operations based in Afghanistan. The renewal of the contract forms a part of the deal awarded to the company in October, 2010, and is valued at $161 million.
According to the terms of the contract, AAR will carry on its services to meet the U. S Military’s Airlift requirement through using two Sikorsky S-92, six Sikorsky S-61, and two Bell 214 ST10 helicopters.
Additionally, the company will continue supporting the U.S. NATO (North Atlantic Treaty Organization) operations in Afghanistan and
U.S. Department of Defense engaging its airlift operating entity by providing rotary-wing aircraft as well as fixed-wing support services. The aircraft allocated by AAR are specifically designed to transport personnel, cargo and mail while the support process offers personnel, tools and maintenance services.
The company has already established itself successfully within the U.S. Government and its associates in Afghanistan, serving transport and logistics requirement of the nation’s defense forces. Thus, this renewal option is expected to strengthen the company’s influence within the U.S. Transportation Command and Department of Defense.
Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leon Zacks. As a PhD from MIT Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Zacks Investment Research
800-767-3771 ext. 9339