Analyst Actions: Citigroup, Kinder Morgan Energy Partners, Ulta Salon

From Standard & Poor's Equity Research

SANDLER O'NEILL UPGRADES CITIGROUP TO BUY FROM HOLD

Sandler O'Neill analyst Jeff Harte says yesterday's news of a joint venture between the U.S. government and Citigroup (C) reinforces his belief that the government has drawn a proverbial line in the sand around Citi's survival.

Harte views the actions as positive for common shareholders. He notes that Citi's balance sheet now has an unprecedented backstop provided by the government.

He cuts $0.06 fourth quarter 2008 EPS view to $0.62 loss on increased credit reserve builds and asset mark-to-market losses. He lowers $1.70 2009 EPS estimate to $1.00 EPS.

MORGAN KEEGAN DOWNGRADES KINDER MORGAN ENERGY PARTNERS

Morgan Keegan analyst John Edwards says he's downgrading Kinder Morgan Energy Partners (KMP) to market perform from outperform on the company's distribution guidance.

Edwards notes that KMP is still basing its 2008 distribution budget of $4.20/unit on $68/barrel, which he believes is optimistic in light of a $60 strip for 2009 and negative economic headwinds that are likely to pressure the outlook for commodity price recovery.

He assumes $50-$60/barrel for West Texas Intermediate crude oil for 2009, and cuts his distribution growth view for KMP to -1.5% for 2009 from his former view of 7.6%.

BAIRD DOWNGRADES ULTA SALON TO NEUTRAL FROM OUTPERFORM

Baird Analyst J. David Cumberland says the downgrade of Ulta Salon, Cosmetics & Fragrance (ULTA) is due to the potential for reduced estimates, multiple contraction amid weak consumer spending.

He expects the company's third quarter near the low end of guidance (comps 3%-5%; EPS $0.08-$0.10; consensus $0.09). He notes that the fourth quarter accounts for over half of projected 2008 EPS (due to gift-related buying); he's concerned about ULTA's ability to reach implied guidance of 3%-5% comps, $0.29-$0.32 EPS.

Cumberland says estimate reductions could cause further multiple contraction from forward p-e of 13.1. He cuts $17 price target to $10.