Zacks Ratings: Barclays Still A Hold

We are maintaining our Hold on Barclays PLC (BCS). The company will report its third quarter trading update on November 17.

We are reducing our EPADS estimates to $3.80 from $4.00 for 2008 and to $4.20 from $4.50 for 2009, mainly due to recent appreciation of the $ against the £. We expect results to continue to reflect global markets’ turmoil and also the recent $1.75 billion acquisition of Lehman Brothers North American investment banking and capital markets operations, funded with £701 million of new equity capital.

Currently, Barclays is trading at 7.7X the consensus earnings estimate for 2008 and 7.4X the 2009 consensus estimate. This is below the industry median P/E ratios of 8.8X for 2008, but on par with the 7.4X for 2009, also based upon consensus estimates.

Barclays estimated future growth matches the industry median, and its attractive 10.3% dividend yield should provide support for the stock price. Our price target of $24 represents approximately a 5 ¾X P/E multiple of 2009 estimated earnings of $4.20 per ADS, providing a PEG ratio of 0.6X, roughly in line with the industry.

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