One View of J.P. Morgan: Great Bank, Pricey Shares

Despite a pristine reputation as the nation's premier money-center banking institution, at least one Wall Street analyst rates shares of J.P. Morgan & Co. as too expensive right now.

"Even a great company's stock can be overvalued, and Morgan's is today," asserted Lawrence W. Cohn, banking analyst at Paine Webber Inc., New York, who recently shifted his assessment of the stock to "unattractive."

Most banking analysts sound more optimistic than Mr. Cohn. They prefer to focus instead on Morgan's unassailable balance sheet, sterling credit quality, and movement into global investment banking. Morgan is the only remaining U.S. bank with a triple-A credit rating.

Most Use Other Figure

George M. Salem of Prudential Securities Inc., New York, expresses the more widely held view. He expects Morgan to earn $5.75 per share next year, and calls the banking company "a global financial powerhouse" with "few true peers."

On Tuesday, Morgan's shares were ahead 37.5 cents to $59.875, up 16% from midyear levels but 10% below the $66.50 peak earlier this month.

Mr. Cohn thinks explosive growth in trading revenue that has propelled Morgan's earnings the past two years "is not sustainable."

Dip Expected

As a result, Mr. Cohn expects a fall in Morgan's earnings next year, to $5 per share from the $5.60 he expects this year.

Mr. Cohn expects 1992 trading revenues to reach $1.1 billion, or the average of the "exceptionally good results recorded in 1990 and 1991," he said.

"But a decline to the still-good levels of trading revenues earned prior to 1990 would imply dramatically lower-than-forecast earnings for the company," he added.

But even on his $5 estimate for next year, Morgan's stock recently traded at 13.2 times earnings. "By any measure of valuation, the stock is near historic peaks," Mr. Cohn said.

Dissent Voiced

Other analysts disagree. "To spend too much time focusing on the trading line item is missing the forest for the trees," said J. Richard Fredericks of Montgomery Securities, San Francisco, who 1992 earnings estimate for Morgan is $5.80.

"Whether customer service is manifested in spread income or fee income, Morgan is serving its sophisticated clientele the way those customers want. Revenue totals should be the key focus."

John J. Mason of Interstate/Johnson Lane, Atlanta, projects earnings of $6.40 a share at Morgan next year. As for its stock price, he thinks "there is more to come for this problem-free, very well capitalized and extremely well-managed company."

Not that Mr. Cohn himself dislikes Morgan. "There is no doubt that J.P. Morgan & Co. is one of the great banking institutions in this country," he declared.

"The company's loss reserve is large enough to protect it from even a cataclysmic economic environment." And he pointed out that "in the current recession, Morgan alone has escaped credit problems completely unscathed."

But Mr. Cohn is not alone in worrying about Morgan's stock price. Analyst Judah Kraushaar of Merrill Lynch Capital Markets dropped his rating to neutral from buy last month because it had "gotten ahead of itself" on a near-term basis.

PHOTO : Morgan Loses Luster

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