Hartford Financial (HIG): Several firms defending

From Notable Calls

Several tier-1 firms are defending Hartford Financial (NYSE: 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 Stanely 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.

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