Stock Picks: Citi, Goldman, Palm, Yahoo

Wall Street analyst opinions on stocks making headlines in Monday's market

Citigroup Inc.: Standard & Poor's equity analyst Matthew Albrecht kept a buy recommendation and $6 price target on shares of Citigroup Inc. (C) on Apr. 19.

Citigroup said on Apr. 19 that its first-quarter profit more than doubled as the global economic rebound trimmed costs for bad loans, trading revenue surpassed analysts’ estimates and the value of subprime mortgage bonds increased.

First-quarter net income of $4.43 billion followed a loss of $7.58 billion in the fourth quarter and a profit of $1.59 billion in the first three months of 2009, New York-based Citigroup said in a statement. Adjusted per-share earnings were 14 cents. Analysts in a Bloomberg survey estimated the company would break even.

In a posting on the S&P MarketScope service, Albrecht said Citigroup's earnings per share (EPS) of 15 cents, vs. a year-earlier loss per share of 18 cents, were well above his estimate of a one-cent loss per share. Albrecht noted that Citigroup's revenues were aided by an improved net interest margin, securities write-ups and trading gains, while costs and the effective tax rate were below his estimate.

"Delinquencies have stabilized or improved across most categories, suggesting further reductions in loss provisioning," the analyst wrote.

Albrecht raised EPS estimates for 2010 to 49 cents from breakeven results, and for 2011 to 50 cents from 17 cents.

Goldman Sachs Group Inc.: FBR Capital removed shares of Goldman Sachs Group Inc. (GS) from its Top Picks list on Apr. 19, and reiterated its outperform rating and $190 price target.

Goldman Sachs sank 13% on April 16, its biggest plunge in more than a year, after the SEC sued the bank and one of its vice presidents. The regulator said the bank created and sold CDOs tied to subprime mortgages in early 2007, as the U.S. housing market faltered, without disclosing that hedge fund Paulson & Co. helped pick the underlying securities and bet against them. Goldman Sachs said the claims are “completely unfounded.” Paulson wasn’t accused of wrongdoing.

In a note, FBR equity analyst Steve Stelmach said Goldman was removed from the Top Picks list due to the negative overhang created by the SEC actions announced on Apr. 16. The stock's rating remains at outperform due to its continued strong fundamentals, Stelmach said, though he recognizes that the regulatory environment does "pose an overhang" on the shares.

Stelmach said that while Goldman has indicated it plans to defend itself against the SEC's accusations, the shares will likely feel near-term pressure from the risk of more negative headlines and the implications of the SEC’s actions on direction of the financial regulatory reform in coming weeks.

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