S&P Picks and Pans: Boeing, Citigroup, Mattel, Yahoo

Analyst opinions on stocks making headlines Wednesday

From Standard & Poor's Equity Research

S&P REITERATES STRONG BUY RECOMMENDATION ON SHARES OF BOEING CO.

BA; $95.52

In a regularly scheduled update, Boeing says the first flight of its 787 will be delayed to mid-November-to-mid-December from September, citing two problems: additional coding needed for the flight control software and insufficient documentation on certain work received from suppliers. Boeing still plans to meet its May, 2008, first delivery date, but sees risk rising. We believe Boeing has control of 787 development well in hand, and we see delays as due to the program's complexity. Given the 706 orders for the 787 received so far, we do not see a moderate delay as significantly hurting long-term results. /R. Tortoriello

S&P MAINTAINS NEGATIVE VIEW ON HOMEBUILDING SUB-INDUSTRY

We expect a housing recovery no sooner than mid-2008. Today's report from the National Association of Realtors showed a 16.1% year-over-year decline in pending existing home sales, and a 12.2% decline from the prior month. In our view, the summer months may be the worst, with some improvement ahead as federal agencies boost mortgage availability. For homebuilders, we believe the rate of decline in order cancellations, net contracts and backlog may ease by year-end. Each company's focus has shifted to liquidity and bank refinancing to endure the downturn with increased sales incentives. /K. Leon-CPA

S&P MAINTAINS STRONG BUY RECOMMENDATION ON SHARES OF CITIGROUP

C; $46.31

Citigroup shares are under pressure this morning after a Wall Street Journal report cited the company's exposure to commercial paper through conduits and Structured Investment Vehicles. Although it is difficult to evaluate Citigroup's full exposure and portfolio quality, due to lack of disclosure, we believe the current market for these assets remains liquid. While we see increased risks related to a tighter commercial paper market, we are maintaining our 2007 EPS estimate of $4.57. /F. Braden

S&P MAINTAINS HOLD OPINION ON SHARES OF MATTEL

MAT; $21.27

Mattel announces its third recall of Chinese-produced toys that contain an excessive amount of lead paint, including 675,000 Barbie doll accessories. Given management's previous comments regarding the possibility of additional recalls, we are not totally surprised, but we are becoming increasingly concerned about the potential impact this news could have on upcoming holiday sales. We also remain concerned about litigation risks. That said, we are keepping our 2007 EPS estimate at $1.60, and our 12-month target price at $27, which is based on historical analysis. /E. Kolb

S&P REITERATES HOLD OPINION ON SHARES OF YAHOO INC.

YHOO; $23.97

Yahoo offers to acquire privately-held BlueLithium, purveyor of a data-driven global online advertising network that offers a variety of direct-response products and capabilities for advertisers and publishers. We think the proposed transaction, valued at some $300 million, is a strong strategic move as Yahoo reconstitutes itself as more focused on technology and scalability. BlueLithium's ad network is the fifth largest in the U.S., and the second largest in the U.K. We think BlueLithium will also aid Yahoo in its behavioral targeting efforts, punctuated by its new Smart Ads. /S. Kessler