Analyst slashes Merrill Lynch forecast

The firm will report $5 billion in additional losses on CDOs, Alt-A and commercial mortgages, says a JPMorgan analyst.

Shares of Merrill Lynch & Co. fell this morning after a JPMorgan Chase & Co. analyst cut the firm’s 2008 profit forecast estimate by 45%, on concerns that further write-downs will pare down its earnings, according to a Bloomberg report.
JPMorgan Chase analyst Kenneth Worthington predicted that Merrill will report $5 billion in additional losses on collateralized debt obligations, Alt-A mortgages and commercial mortgage.
He lowered his earnings estimated for the year to $2.75 per share from an earlier projection of $5 per share.
For 2009, Mr. Worthington expects the New York-based financial services company to earn $5.09 per share, down from the previous estimate of $5.57.
In the previous two quarters, Merrill wrote down $25 billion of assets.
“With the credit environment continuously challenging, we are less optimistic about a material recovery in 2008,” Mr. Worthington wrote in a note on Monday.
However, he kept his “neutral” rating on Merrill.
Meanwhile, Fox- Pitt Kelton analyst David Trone told investors on Monday that Merrill will write down as much as $8 billion of corporate loans, subprime and other mortgages, commercial real estate and exposure to troubled bond insurers, according to a Dow Jones Newswires report.
Earlier Monday, Credit Suisse Group analyst Susan Roth Katzke forecast a net loss of $1.65 per share for Merrill, down from her previous forecast of a profit of 43 cents a share.
Shares of Merrill Lynch were down 51 cents to $47.87 in afternoon trading.