Keeping Buy on Citigroup

Also: analysts' opinions on Ciena and Hewlett-Packard; plus more

Citigroup (C ): Reiterates 5 STARS (buy)

Analyst: Stephen Biggar

Citigroup agreed to acquire Grupo Financiero Banamex, Mexico's largest commercial bank, for $12.5 billion in cash and stock. The acquisition continues Citigroup's globalization strategy, and seeks to take advantage of the easier import/export flow between Mexico and the U.S. as well as the expanding U.S. Hispanic population. The combined operations will wisely use the Banamex brand name. The transaction is expected to close in Q4 and be accretive in 2002. Citigroup's ability to maintain EPS momentum relative to its peers is helped by its unparalleled global presence and product diversity.

Ciena (CIEN ): Maintains 4 STARS (accumulate)

Analyst: Ari Bensinger

The company posted $0.20 vs. $0.06 April quarter EPS, which was impressive at $0.03 above S&P's estimate. Sales were up 21% from Q3 to $425 million, compared with S&P's $405 million estimate. The company continues to diversify its customer base, which now totals 49. CoreDirector exceeded 10% of revenue. S&P expects gross margin to decrease moderately, as the company sees signs of heightened pricing pressures. Despite the difficult environment, Ciena confirmed its fiscal 2001 (Oct.) EPS guidance of $0.72-$0.75. Ciena is set to be the prime beneficiary of a carrier spending shift from legacy to more efficient next-generation equipment.

Ann Taylor Stores (ANN ): Maintains 4 STARS (accumulate)

Analyst: Maureen Carini

Ann Taylor posted Q1 EPS $0.37 vs. $0.38. Total sales rose 10.8% on a 3.5% decline in same-store sales. Margins were hurt by sharp markdowns that were taken to clear out merchandise that was too "fashion forward". But S&P believes the company is back on track with a renewed focus on its core customer. New division presidents are in place, which relieves the uncertainty about the merchandising direction. Although same-store sales comparisons are likely to be negative in Q2, S&P believes the second half will bring a return to mid-single digit gains and improving margins. S&P is raising the fiscal 2002 (Jan.) EPS estimate by $0.05 to $2.25.

Hewlett-Packard (HWP ): Reiterates 3 STARS (hold)

Analyst: Megan Graham-Hackett

The company announced April quarter EPS of $0.15 vs. $0.39, within its preannounced range of $0.13-$0.17. Revenues fell 4%, also in line with lowered guidance. H-P cited a weak consumer segment (where the company's revenues declined 8%), and weak capital spending (enterprise revenue was down 1%). Unix revenue declined 13%, imaging/printing dipped 3%, and home PC sales fell 15%. The biggest disappointment was adverse results for computing systems. H-P now sees July quarter revenue flat to down 5% vs. the April quarter, compared to its prior guidance of flat. The company says it's comfortable with the Street mean July quarter EPS estimate of $0.23. S&P still sees fiscal 2001 (Oct.) EPS at $1.05.

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