CIBC KEEPS SECTOR UNDERPERFORM ON CITIGROUP
CIBC analyst Meredith Whitney says Citigroup's (C) deal with Abu Dhabi is reminiscent of a similar deal in the early 1990s, when Citigroup was in similar dire straits. With this $7.5 capital infusion, she now waits for Citigroup to sell assets and cut its dividend to shore up its capital base.
Whitney says at the end of the third quarter, Citigroup had a precariously low tangible capital ratio at 2.8% and a Tier 1 Ratio of 7.3%. As Citigroup has previously announced a $11 billion charge in the fourth quarter, even with this infusion, she still expects these ratios to decline, but now certainly not as low as previously expected.
She continues to believe Citigroup is only in the early stages of its capital pressures. She reiterates sector underperform.
BROADPOINT CAPITAL UPS ESTIMATES FOR ACTIVISION
Broadpoint analyst William Lennan says Activision (ATVI) raised third quarter and fiscal year 2008 (ending March) guidance materially on strong sales of Guitar Hero III. He notes that the company now sees $1.225 billion third quarter revenue and $0.70 pro-forma EPS, up from its prior view of $1.050 billion and $0.55, respectively; for fiscal year 2008, the company now sees $2.30 billion revenue and $0.85 pro forma EPS (vs. $2.07 billion and $0.65).
Lennan lifts his third quarter estimates to $1.22 billion in revenue and $0.70 EPS from $1.06 billion and $0.54; his fiscal year 2008 revenue and pro-forma EPS go to $2.30 billion and $0.86 from $2.07 billion and $0.65. And his fiscal year 2009 revenue and pro forma EPS go to $2.68 billion and $1.02 from $2.38 billion and $0.87.
He reiterates a buy rating with a $26 target price, or 26 times his fiscal year 2009 EPS estimate.
BEAR STEARNS DOWNGRADES ARBITRON
Bear Stearns analyst Alexia Quadrani notes that Arbitron (ARB) will delay the rollout of its PPM (Portable People Meter) electronic ratings in five major markets due to client and industry concerns over sample sizes in certain demographics. She notes that the remaining top 50 markets are scheduled to roll out as originally planned with all top 10 markets still to be commercialized by yearend 2008.
As a result of the delay, Quadrani cuts 2007 EPS estimate by $0.08 to $1.30-$1.35, 2008 by $0.32 to $1.36. While she is disappointed Arbitron gave in to industry pressures, she remains confident in the PPM story longer term. However, she cuts to peer perform from outperform as the disappointing announcement will shake investor confidence in the story.