Markets & Finance

S&P Picks and Pans: Citi, Walgreen, Acxiom, Thomas Weisel


Analyst opinions on stocks making headlines Monday

S&P MAINTAINS STRONG BUY RECOMMENDATION ON SHARES OF CITIGROUP

From Standard & Poor's Equity Research

C; $46.67

Citigroup announces it expects third-quarter net income to fall about 60% from the prior-year quarter. The decline is largely due to write-downs in leveraged loan commitments, losses on the value of collateralized debt obligations (CDOs) and collateralized loan obligations (CLOs), losses in fixed-income trading and higher credit costs in Citigroup's global consumer segment. We believe results will improve during the fourth quarter, but we are lowering our third-quarter EPS estimate to 45 cents from $1.13, and we are cutting our 2007 estimate to $3.89 from $4.58. We are also lowering our 12-month target price by $2 to $61, 12 times our $5.07 2008 EPS estimate and a discount to Citigroup's historical average. /F. Braden

S&P DOWNGRADES OPINION ON SHARES OF WALGREEN CO. TO HOLD FROM STRONG BUY

WAG; $41.13

Walgreen posts August-quarter EPS of 40 cents, vs. 41 cents, 8 cents below our estimate. Results were hurt by margin pressure stemming from lower reimbursements on some newly released generic drugs and higher salary, store expenses and advertising costs. Non-pharmacy growth appears healthy to us, with margins benefiting from a favorable shift in mix. We are reducing our fiscal 2008 (ending August) EPS estimate by 15 cents to $2.25, as we reduce the margin contribution we expect from new generic drug sales. Due to our forecast of a slowdown in EPS growth, we are cutting our target price by $11 to $45, on p-e analysis. /J. Agnese

S&P DOWNGRADES OPINION ON SHARES OF ACXIOM CORP. TO SELL FROM HOLD

ACXM; $15.17

This morning, Acxiom agreed to terminate its previously announced acquisition by an entity controlled by private equity firms ValueAct Capital and Silver Lake Partners. Acxiom will receive $65 million in cash to terminate the agreement, compared to $110 million in the original agreement. In addition, Charles Morgan will retire as company leader upon selection of a successor. We believe business conditions are deteriorating and we are cutting our fiscal 2008 (ending March) estimate to 52 cents from $1.02 and our target price to $15 from $27, a 25 times multiple on our fiscal 2009 EPS forecast, below recent historical average. /E. Kwon, CFA

S&P REITERATES HOLD OPINION ON SHARES OF THOMAS WEISEL PARTNERS

TWPG; $15.00

The company has announced it agreed to acquire Westwind Partners in a cash and stock deal expected to close in January, 2008, pending necessary approvals. Westwind is a Canadian-based investment bank focused on the energy and mining sectors. Weisel expects the deal to be accretive to revenue and earnings immediately, before deal-related costs. We applaud the move, as it expands the company's geographic reach and its industry, research and sales coverage. We are keeping our 12-month target price of $17, 17 times our 2007 EPS estimate, in line with peers. /M. Albrecht


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