S&P Picks and Pans: Citi, Genentech, AMAT, State Street, Biogen

Analyst opinions on stocks making headlines in Tuesday's market

From Standard & Poor's Equity Research

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF CITIGROUP

C; $27.15

Following Citi's conference call, we are lowering our 2008 EPS estimate to $3.58 from $3.74 to reflect our view of rising credit losses in its U.S. consumer segment. Citi saw its U.S. credit quality deteriorate at an accelerating rate throughout the fourth quarter. Headcount was not reduced as much as we expected, but Citi says that such reductions will be ongoing. The $14.2 billion capital infusion helps Citi's capital base, in our view, but it still maintains $37.3 billion in total direct subprime exposure. We are lowering our target price by $2 to $36, 10X our 2008 EPS estimate, a discount to Citi's historical average. /F. Braden, CFA

S&P DOWNGRADES SHARES OF GENENTECH TO HOLD FROM BUY

DNA; $68.82

After option expense, fourth-quarter EPS of 62 cents vs. 57 cents misses our forecast by 3 cents. fourth-quarter Avastin sales were up 23% from a year ago, but $15M below our view and well shy of past growth trends. Rituxan sales rose only 6%, and Lucentis saw 9% decline, on off-label Avastin use. Despite positive long-term view, we see pressure on Genetech to re-ignite growth, and see likely approval delay for breast cancer indication, with new data expected in 2008. We trim our 2008 EPS estimate by 5 cents to $3.15 and set 2009's at $3.61. We cut our P/E-based 12-month target price by $4 to $76, 24X our 2008 estimate. /S. Silver

S&P REITERATES BUY OPINION ON SHARES OF APPLIED MATERIALS

AMAT; $16.99

AMAT announces a global cost reduction plan that will reduce its global workforce by about 7%. The company projects the plan will result in annual savings of $150 million from the company's fiscal 2007 (Oct.) spending levels. We think the reduction comes at an opportune time, as, in our view, the semiconductor equipment industry is currently experiencing a prolonged cyclical downturn. We are slightly increasing our fiscal 2008 EPS estimate by 4 cents to $1.04, and are maintain our 12-month target price of $21, based on a peer-premium P/E multiple. /A. Zino, CFA

S&P REITERATES BUY RECOMMENDATION ON SHARES OF STATE STREET

STT; $79.52

State Street posts fourth-quarter operating EPS of $1.38 vs. 86 cents, 2 cents below our forecast. Results benefited from a 73% increase in trading services revenue, driven by higher volumes and volatility in foreign exchange. The company's securities finance revenue also benefited from turmoil in the fixed income markets. We believe the 41% share of revenues from non-U.S. sources should help protect the company from a slowdown in the U.S. environment. We our keeping our 2008 EPS estimate of $5.10, and maintain our 12-month target price of $91, 17.8X that estimate and in line with peers. /F.Braden-CFA

S&P REITERATES BUY OPINION ON SHARES OF AMERIPRISE FINANCIAL

AMP; $53.46

We believe the company is well positioned relative to peers in the current market environment. We think its mix of stable, high-net-worth clients and insurance products should provide solid revenue growth in the year ahead, supported by growing efficiencies from completion of its separation from American Express (AXP). We look for strong wrap and variable annuity flows to drive approximately 8% growth in both 2007 and 2008. We are keeping our EPS estimates unchanged for both years, but cut our target price by $10 to $65, a discount-to-peers 14.6X P/E. /M.Albrecht

S&P REITERATES HOLD OPINION ON SHARES OF BIOGEN IDEC

BIIB; $59.91

Biogen and partner Elan Corp (ELN) receive FDA approveal for Tysabri in treating moderate to severe Crohn's disease for patients who failed or cannot tolerate standard treatments. Like Tysabri for Multiple Sclerosis, FDA will require adherence to risk management program. While we think the news was expected based on prior FDA panel endorsement, we view it as an incremental positive, since we view Tysabri as Biogen's key growth driver. We do not see material sales impact before 2009, as enrollment and monitoring program ramp up. We keep our 12-month target price at $65. /S.Silver