Goldman Sachs Defends Federal-Mogul With Upgrade (FEMO)

Federal-Mogul Corp. (Pink Sheets: FEMO) was raised from a Neutral to a Buy rating at Goldman Sachs this morning.  Goldman Sachs noted that the 29% sell-off since its post-bankruptcy issuance has created a unique entry point.  Its 6-month target is $27.00, which leaves an implied upside of greater than 30% compared to Monday’s close.  The firm notes that its end market positioning is very defensive.  It notes that 40% of sales come from the less cyclical after-market.  It also likes its estimated implied free cash flow yield of about 11.2% already factoring in a recession, and back-end loaded growth and Carl Icahn owning more than 75% of the company is also discounted at the current price.

Federal-Mogul has only been post-emergence under the new ticker since early January and its shares have fallen from $26.00 to under $20.00, before closing at $20.48 yesterday.  There are far too few analysts that cover this so far to derive a real consensus for an outlook, although that may change in the coming weeks and months.

Jon C. Ogg
March 4, 2008