Goldman Analyst Upgrades Mid-cap Brokers Sector

BOSTON (AP) — A Goldman Sachs analyst on Thursday upgraded his sector rating for midsized brokerages, saying an expected resurgence of corporate mergers and acquisitions as well as initial public offerings should lift the firms.

In addition to raising his coverage view of mid-cap brokers to "Attractive" from "Neutral," Goldman analyst Daniel Harris raised his rating on the M&A boutique firm Greenhill & Co. to "Neutral" from "Sell." Harris also raised price targets and revised earnings estimates for several stocks in the group.

Firms in the sector benefit from providing financial expertise to companies considering strategic tie-ups, but M&A activity has been quiet amid a recession and credit crunch that have made dealmaking difficult due to a lack of financing.

But Harris said in a research note that the outlook is improving for M&A as well as for issuance of new stock through initial public offerings. Activity in both areas is typically cyclical, and IPOs create potential underwriting business.

"The M&A and equity issuance cycles are showing initial signs of improvement," Harris said in a research note.