Can MBIA Revive in 2012?

With 2012 just beginning, now's a good time to gauge how the stocks you're interested in are likely to do this year and beyond. By knowing what stock analysts and fellow investors expect from a stock, you'll be smarter about whether you should buy it for your portfolio -- or sell it if you already own it.

Today, let's take a look at MBIA (NYS: MBI) . As I discussed last month, the company managed to survive an incredibly difficult environment for bond insurers over the past several years. With the housing market potentially having hit bottom and problems in the municipal bond market not coming to pass -- at least not yet -- can MBIA finally post some strong gains in 2012? Below, I'll take a closer look at what people expect from MBIA and its rivals.

Forecasts on MBIA

Median Target Stock Price


2011 EPS Estimate


2012 EPS Estimate


Expected Annual Earnings Growth, Next 5 Years


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Source: Yahoo! Finance.

Will MBIA keep moving fast in 2012?
Analysts have high hopes for MBIA, with target stock prices more than 60% higher than their current levels. Interestingly, though, they see those gains coming from weaker sales -- MBIA revenue estimates for 2012 are more than a quarter lower than what the company's likely to have posted in 2011.

The big question for MBIA's 2012 is what will happen in its main areas of business exposure. Judging from weak expectations for more mortgage-focused insurers MGIC Investment (NYS: MTG) and Radian Group (NYS: RDN) -- both of which are seen posting red ink in 2012 -- the mortgage business looks like it'll be a drag on MBIA. On the other hand, Assured Guaranty (NYS: AGO) similarly sees strength in its municipal bond business, suggesting that the muni crisis that some have predicted may not come to pass. Still, though, muni bond yields are quite a bit higher than those on Treasuries of comparable maturities, which shows that investors still see greater risk in muni bonds.

Another key issue remains potential liability to other financial institutions. The $1.1 billion settlement it paid to Morgan Stanley (NYS: MS) last month marks a step in the right direction, but with other suits outstanding, it'll take a while for MBIA to work its way through the issue.

If the financial system avoids any other shocks -- such as a European sovereign crisis -- then MBIA is in good position to see gains from its somewhat depressed levels. Even with lower levels of activity, a return to consistent profitability will undoubtedly cheer shareholders.

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At the time thisarticle was published Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.

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