S&P Keeps Strong Buy on Citigroup

Plus: Analyst opinions on Bristol-Myers Squibb and Schering-Plough

From Standard & Poor's Equity Research

Citigroup (C)

Reiterates 5 STARS (strong buy)

Analyst: Frank Braden

Citigroup agrees to acquire Egg Banking for about $1.127 billion from Prudential plc (PUK) of the UK. Egg Banking is the world's largest pure online bank with over 3 million customers and approximately 2.9 million credit card customers, over 5% of the UK's credit card market. We believe this is a good complement to Citi's existing UK consumer business, which focuses primarily on the wealth management and near-prime lending markets. Egg, however, has recently been affected by the UK's poor credit environment. The deal is expected to close within the next 60-90 days, pending necessary approvals.

Bristol-Myers Squibb (BMY)

Reiterates 3 STARS (hold)

Analyst: Herman Saftlas

Sanofi-Aventis (SNY; 3 STARS) and Bristol are said to be planning a merger, according to an unconfirmed report in Reuters. We think such a combination makes strategic sense, given long-established joint marketing deals on Plavix and Avapro, Bristol's improving R&D pipeline, and significant potential savings (we note that Bristol's dividend payout alone is an annual $2.2 billion). However, we do not think a deal is likely before decision comes in U.S. Plavix patent litigation. We are keeping our target price of $27 on Bristol, on discounted cash-flow assumptions plus a 4.0% yield.

Schering-Plough (SGP)

Reiterates 4 STARS (buy)

Analyst: Herman Saftlas

Schering posts fourth-quarter EPS of 17 cents, vs. 7 cents one year earlier, 2 cents below our estimate, due to higher-than-expected SG&A and R&D spending. However, sales growth of 14% exceeded our forecast, driven by strength in Remicade (+34%) and Nasonex (+37%). Equity income from the Vytorin/Zetia venture with Merck (MRK; 4 STARS) climbed 50% to $403 million. We think Schering's turnaround strategy is progressing well, with ongoing cost streamlining and an improving R&D pipeline expected to fuel robust EPS growth in the years ahead. We are raising our target price by $1 to $28 on our revised forward p-e and discounted cash-flow assumptions.