Friedman, Billings, Ramsey & Co. has initiated coverage of the Federal Home Loan Mortgage Corp. with a "buy" recommendation. It set a 12-month price target of $113 per share.

Carla D'Arista, an equities analyst, said the shares would continue to outperform the market despite recent price gains linked to indications of stabilizing interest rates.

Freddie Mac's first-half earnings were up 19%. Ms. D'Arista said the company's compelling fundamentals are likely to be augmented by improved credit quality and additional repurchases of common shares.

The analyst also noted that several factors bode well for Freddie Mac's earnings, including improving credit quality and the company's ability to withstand interest rate volatility.

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