S&P Stock Picks and Pans

S&P Picks and Pans: Citigroup, Morgan Stanley, Abbott Labs, Wipro, Satyam


S&P MAINTAINS HOLD OPINION ON SHARES OF CITIGROUP (C; 6.34):

According to an unconfirmed report in the Financial Times, Citigroup could receive a cash payment of $2.7 billion for sale of a 51% stake in its brokerage unit to Morgan Stanley (MS; 20.54). If such a deal was consummated, Citi would not only boost its liquidity but increase its capital levels, as the deal would enable Citi to revalue its entire holding at the sale price. We think such a sale would stem largely from Citi's capital concerns and may presage larger-than-expected fourth quarter writedowns. Before the sale of Citi's German banking business, we are widening our 2008 loss estimate by $1.02 to $3.82. -S. Plesser

S&P KEEPS BUY RECOMMENDATION ON SHARES OF MORGAN STANLEY (MS; 20.35):

An unconfirmed report in the Financial Times says MS may pay Citigroup $2.7 billion for a 51% stake in a venture joining the brokerage operations of the two firms. We expect funding would come from the $19 billion MS has raised in the past few months. We think such a venture could have an advantage over competitors in retaining advisors because of the relatively similar cultures behind the companies, and a strong brokerage competitor could develop. We are raising our target price by $7 to $27, 1.0 times projected tangible book value, as the operating environment improves. -M. Albrecht

S&P REITERATES STRONG BUY OPINION ON SHARES OF ABBOTT LABORATORIES (ABT; 50.64):

ABT agrees to buy Advanced Medical Optics (EYE; 21.67) for $2.8 billion in cash and assumed debt. Despite its huge premium to EYE's closing price of $8.85 on Friday, we think the planned transaction is a long-term plus for ABT, providing entry into cataract and LASIK surgical products that we think will grow 8%-11% once the economy recovers. ABT expects the deal to be EPS-neutral in 2009, and accretive in 2010. It reiterates 2009 EPS guidance of $3.65-$3.70, representing about 10% growth. We keep our $65 target price, based on peer p-e and DCF assumptions. ABT's dividend yield is 2.8%. -H. Saftlas

S&P REITERATES HOLD OPINION ON ADSS OF WIPRO LIMITED (WIT; 7.56):

ADSs are down over 7% this morning after WIT reveals it has been barred from doing business with the World Bank between 2007 and 2011. We believe the company's revenue from the Bank is small, so we are not changing our revenue and earnings per ADS estimates. We think investors are cautious regarding any news from Indian IT outsourcers that even have the appearance of impropriety, given the recent allegations that have surfaced at rival Satyam (SAY; 1.19). WIT is scheduled to report December-quarter results on Jan. 21. We are maintaining our 12-month target price of $9. -D. Cathers

S&P DROPS ANALYTICAL COVERAGE ON THE ADSS OF SATYAM COMPUTER SERVICES (SAY; 1.1):

The ADSs are trading sharply lower after being halted since Jan. 6, when allegations of massive fraud were made. India's government has appointed three members to SAY's board of directors, which was dissolved on Jan. 9. The new members are expected to meet soon, and we expect they will discuss strategic alternatives. They will also have to address the company's unknown financial situation, which likely includes a lack of cash. With no credible financial information available and expected restatements, we are dropping analytical coverage. Our last opinion was hold . -D. Cathers

All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is or will be, directly or indirectly related to the specific recommendations or views expressed in this research report. Standard & Poor's Regulatory Disclosure

Any advice, analysis, or recommendations contained in articles labeled "Insight from Standard & Poor's" reflect the views of Standard & Poor's, which operates separately from and independently of BusinessWeek Online. It is possible that BWOL may from time to time publish information that is not consistent with advice, analysis, or recommendations that are published by Standard & Poor's. Standard & Poor's and BusinessWeek Online are each units of The McGraw-Hill Companies, Inc.


Race, Class, and the Future of Ferguson
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

Sponsored Financial Commentaries

Sponsored Links

Buy a link now!

 
blog comments powered by Disqus