Lehman Brothers Cut Countrywide Outlook

October 9, 2007 No Comments »

Analysts at Lehman Brothers lowered their earnings estimate for Countrywide during the third quarter to a loss of 95 cents a share, citing too much uncertainty at the beleaguered mortgage lender.

The analysts said they also expect Countrywide to write down $740 million for some unsold loans in the third-quarter.

According to Yahoo data, analysts a week ago estimated a loss of 74 cents for the quarter, while two months ago they projected a profit of 76 cents.

“While most of the causes of the loss are well understood by now, expectations for the size of the marks Countrywide will take still vary widely,” a research note said.

“While the size of the mark and the third-quarter loss is relevant, we expect investors will be more concerned about Countrywide’s liquidity, its origination outlook and credit trends.”

A while back, I mentioned that certain aspects of the Countrywide business model were at risk because of liquidity issues, namely the correspondent lending channel and the wholesale division.

“Fears about liquidity seem to be easing some, but unless credit stabilizes and the non-conforming mortgage market bounces back, we don’t expect Countrywide to earn more than $2 a share in 2008, so the stock appears fully valued.”

The good news for Countrywide is that they’ll likely be bought out by Bank of America before things deteriorate beyond repair.

Meanwhile, CEO Angelo Mozilo continues to dump shares of Countrywide as part of his 10b-5 plan.

Shares of Countrywide were trading down 79 cents, or 3.93% to $19.31 in late trading on Wall Street.

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