Hartford Financial Gets Unified Sell-Side Backing

Several tier-1 firms are defending Hartford Financial (HIG) following last night's conservative guidance:

- Citigroup notes that despite an initial 2008 guidance range ($9.80-$10.20) which was lower than the Street's $10.51, they would expect that based on history, guidance will rise over the course of 2008 (barring a large unexpected asbestos charge or significant hurricane activity in 2008).

They are inclined to believe that management tends to set the operational bar at a very achievable level. A detailed analysis of earnings surprise history suggests likely EPS outperformance in 2008. Since 1997, the company has reported earnings beat 64% of the time. Firm notes that the average quarterly EPS surprise is $0.10/share since 1997.

When HIG announced its 2007 estimates back in Dec 2006, the stock dropped to the $85-86 range only to achieve more than 20% upside in the six months to follow. Shares declined 3% on Friday in advance of the guidance as short-term traders expected a low guidance range. Maintains Buy and $118 tgt.

- Goldman Sachs says that based on HIG's outlook, they have reduced their 2008-2011 EPS estimates by $0.60, $0.40, $0.55, and $0.65 to $10.40, $11.15, $11.50, and $12.05, respectively. Firm notes that their 2008 EPS estimate remains above the high end of management's guidance as they believe that the company attempts to set a conservative bar each year. In addition, they expect reserves to continue to develop favorably, which the company does not forecast.

- Morgan Stanley continues to recommend investors accumulate a position in Hartford, and are downplaying the significance of guidance coming below expectations. Trading at just 9 times firm's 2008 estimate, they believe the valuation remains attractive, with over 20% potential upside to their $116 price target.

Notablecalls: While I'm not too familiar with HIG, I like what I see. Should the stock gap down say below the $90 level, I think it becomes a good bounce candidate. It's not every day one sees such unison defense from several tier-1 firms.

Comments

[jrheintz:]

Here we go again, sounds like the AIG report, plently of cash, so why are they now over 140B, lets face it these Wall Streeters are covering for all clients. Just give us the truth, there is something very wrong about the Hartford picture, just review everything that has happened in financials over the past several month and prepare your selves for the jolt of the century. 1929 all over again., I saw it then, same picture to-day.

2008 Oct 31 04:13 PM