Lehman Brothers (LEH) Lower on Analyst Cuts and Reports of Ineffective Hedges
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Shares of Lehman Brothers Holdings Inc. (NYSE: LEH) are 5% lower in mid-day action today following more analyst estimates reductions and reports of ineffective hedging.
Ladenburg Thalman analyst Dick Bove lowered his 2008 EPS estimates on the investment bank from $3.87 to $2.36, in addition to lowering 2009 and 2010 estimates. Bove cut his price target on Lehman from $48 to $38.
In addition, Merrill Lynch analyst Guy Moszkowski cut 2008 EPS estimates from $3.88 to $2.80. The Merrill analyst said some hedging efforts could have backfired.
A Wall Street Journal article today said some of the hedges used by the investment banks to offset losses in real estate and other securities could actually hurt them. The paper said the indexes, like the CMBX, which the banks bet against as a hedge, rose much more than the securities they were hedging. The paper said, Lehman's write-downs on assets and ineffective hedges will likely range from $1.5 billion to $2 billion.
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