Merrill Lynch

analyst Judah Kraushaar raised his rating on a pair of brokerages Friday, just weeks after he

slashed first-quarter earnings estimates for three companies and helped tank the sector.

February and March have been terrible months for the brokerages. Along with the plunging stock market, many of these companies have seen their share prices hit 52-week lows. Companies have been announcing earnings warnings and layoffs. The once rah-rah environment turned blah-blah quickly.

So are these guys oversold?

Kraushaar raised

Goldman Sachs

(GS) - Get Report

and

Legg Mason

(LM) - Get Report

to intermediate-term accumulate from intermediate-term neutral, based mainly on their cheap prices. But Kraushaar said some fundamentals were showing improvement. Cuts to the federal funds rate have historically resulted in more underwriting for brokerages, and the analyst said that other areas, like mergers and acquisitions and underwriting, could bounce back too.

"For the first time since its

1999 IPO, we see moderately interesting value in Goldman Sachs," he wrote to investors. ". . .the advent of lower long-term interest rates has enhanced the valuation appeal of the franchise, which we believe can deliver 14% long-term earnings-per-share growth, preeminent in the financial services industry."

Goldman Sachs rose 42 cents, or 0.5%, to $88.37 in recent

New York Stock Exchange

trading. Legg Mason was up 15 cents, or 0.3%, to $45.90. The

American Stock Exchange Securities Broker/Dealer Index

was down 1%.