S&P Picks and Pans: Citigroup, Under Armour, Bunge, Yahoo, P.F. Chang's

Analysts' opinions on stocks in the news Wednesday

From Standard & Poor's Equity Research

S&P MAINTAINS HOLD OPINION ON SHARES OF CITIGROUP (C; 5.90):

According to unconfirmed Wall Street Journal report, Citigroup will soon announce that it will shed a raft of businesses and shrink itself by one-third. The report states that Citi will concentrate on wholesale banking for corporate clients and retail banking for wealthy retail customers. The difficulty of such a plan, in our opinion, will be realizing acceptable prices for the assets it plans to shed. But assuming that Citi is able to sell these assets at least at holding value, its tangible capital ratios should approach an acceptable 3.5%, including a gain from planned Smith Barney sale. -S. Plesser

S&P LOWERS RECOMMENDATION ON SHARES OF UNDER ARMOUR TO BUY FROM STRONG BUY (UA; 22.32):

UA reports preliminary fourth quarter EPS of $0.16-$0.18 on $180 million sales, falling short of our $0.55 and $210 million estimates. Wholesale cancellations and weaker-than-expected direct sales drove the miss, and we are reducing our 2008 EPS estimate to $0.77 from $1.15. We are taking down our 2009 sales and EPS estimates as well, to a 4.5% sales gain and $0.77 EPS, from our previous forecast for 15% top-line growth and EPS of $1.50. We see breakeven results for the next two quarters and, with the earnings back-end loaded, we are cutting our 12-month target price to $25 from $33. -M. Driscoll-CFA

S&P DOWNGRADES OPINION ON SHARES OF BUNGE LTD TO SELL FROM HOLD (BG; 48.17):

BG reports preliminary 2008 EPS of $7.70, significantly below our $10.30 expectation, reflecting unfavorable forex and adverse global economic environment. Fertilizer sales were hurt during the fourth quarter, as Brazilian farmers were pressured by tighter credit markets. With softness in demand expected to continue as adverse economic conditions impact end customers and business partners through at least mid-2009, in our view, we are reducing our 2009 EPS estimate by $1.25 to $7.00. As a result, we are reducing our 12-month target price by $3 to $42, on updated comparative and p-e analyses. -J. Agnese

S&P REITERATES BUY OPINION ON SHARES OF YAHOO INC (YHOO; 12.10):

YHOO announces former Autodesk Chairman Carol Bartz as its new CEO. We think Bartz brings managerial talent, decades of experience with technology companies across Silicon Valley, extensive relationships, and a fresh perspective to YHOO. However, we have concerns related to her lack of background in the Internet and online advertising areas. Also, president Sue Decker will leave YHOO, pending a transitional period. We think Decker was once considered a likely future YHOO CEO, but was impaired by company missteps in recent years, and we wonder who will fill her role. -S. Kessler

S&P LOWERS OPINION ON P.F. CHANG'S SHARES TO STRONG SELL FROM HOLD (PFCB; 17.94):

We see growing economic evidence to support our projection that guest traffic at casual dining chains in 2009 will decline 4%. With the average P.F. Chang's check at nearly $20, we think it may experience a more severe traffic decline than we see for the industry as a whole. Moreover, we think PFCB will likely experience diminished pricing power. We lower our sales forecast for 2009 from a 2% rise to a 2% decline, and cut our EPS estimate by $0.15 to $1.00. On 12% weighted average cost of capital, up from 10.6% on greater risk, we lower our DCF-based target price by $4 to $14. -M. Basham