Analyst Picks & Pans August 17, 2010, 10:54AM EST

Stock Picks: Citigroup, Flir Systems, Pride International

Wall Street analysts offer buy, sell, or hold opinions on stocks in the news on Aug. 17

By Businessweek.com and Bloomberg News Staff

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Citigroup: Standard & Poor's equity analyst Erik Oja maintained a buy rating on shares of Citigroup (C) on Aug. 17, with a price target of $5.50.

A U.S. judge said she wasn't ready to approve Citigroup's $75 million settlement with federal securities regulators over claims the bank misled investors by failing to disclose $40 billion in subprime-related holdings, Bloomberg News reported Aug. 17.

U.S. Judge Ellen Huvelle wasn't satisfied with the written proposal and wants more information, said Matthew Miller, an attorney for a Citigroup shareholder. Attorneys are to submit a new round of court filings starting Sept. 8.

The company made misstatements on earnings calls and in financial filings about assets tied to subprime loans as the housing crisis unfolded in 2007, the Securities & Exchange Commission said July 29 in a complaint filed in federal court in Washington. Some disclosures omitted more than $40 billion in investments, the SEC said. SEC spokesman Kevin Callahan and Shannon Bell, a Citigroup spokeswoman, both said the judge's questions will be answered.

Former Chief Financial Officer Gary Crittenden, who left Citigroup last year, agreed to pay $100,000 to settle claims he didn't disclose the risk after getting internal briefings. Arthur Tildesley, Citigroup's former head of investor relations, will pay $80,000 to settle claims that he helped draft disclosures that misled investors, the SEC said. Tildesley now heads cross-marketing at Citigroup, according to the agency. Citigroup, Crittenden, and Tildesley agreed to settle the case without admitting or denying the SEC's allegations.

In a posting on the S&P MarketScope service, Oja said that he expects a new settlement to be worked out, "perhaps including additional [Citigroup] employees and a higher settlement amount."

"Still, with the shares trading at a discount-to-peers valuation, we see rising long-term value in the franchise," he said. S&P's 12-month price target of $5.50 is roughly equal to its projection of Citigroup's yearend book value per share, which is below its historical average and the comparable valuation of the company's peers, Oja said.

Flir Systems: Morgan Joseph equity analyst Michael French maintained a hold rating on shares of Flir Systems (FLIR) on Aug. 17.

On Aug. 16, the maker of night-vision cameras used by U.S. combat forces agreed to acquire ICx Technologies (ICXT), a developer of advanced sensor technologies, for $7.55 a share in cash.

ICx said the deal may be completed in the fourth quarter.

In a note, French said ICx products include infrared cameras as well as a variety of sensor systems, including radars and chemical, biological, nuclear, radiation, and explosive detection capabilities. ICx's cameras generally do not compete with Flir's, French said.

"We think FLIR has an opportunity to include its cameras on towers built by ICx and market ICx products via its distribution channel, including to international customers [that] presently account for approximately 5 percent of ICx's sales," the analyst said.

French said he remains "concerned" about Flir's ability to surpass growth expectations this year, given the revenue and earnings gap expected to be left by the completion of the BETSS-C/RAID program for the U.S. Army, which provides tower-based persistent surveillance for the protection of troops.

Pride International: Natixis Bleichroeder equity analyst Roger Read raised a rating on shares of Pride International (PDE), the Houston-based oil and gas driller, to buy from hold on Aug. 17. He lowered a price target on the shares to $31 from $33.

"Following the Macondo/Deep Horizon well disaster, investing in offshore drillers, especially deepwater-focused drillers like Pride, is not as clear-cut as it used to be," Read said in a note. He said the well explosion and oil spill in the Gulf of Mexico, and the subsequent pullback in Pride's share price, has created "a solid opportunity to invest" in Pride, which he called "the most deepwater [leveraged] stock."