S&P Keeps Strong Buy on Citigroup

Analyst Mark Hebeka does not see any short-term impact of Magner's departure. Plus: opinions on Yahoo and Amylin Pharmaceuticals

Citigroup (C ): Reiterates 5 STARS (strong buy)

Analyst: Mark Hebeka, CFA

Citigroup announces the Chairman and CEO of its Global Consumer Group, Marjorie Magner, is leaving the company on Oct. 1. The group will now be organized along consumer lines, with its co-heads from North America and International operations. We view this move as a natural progression for Citigroup as it works to realign and invigorate its maturing North American consumer business and continue substantial international growth. We do not see any short-term impact of Magner's departure and continue to believe the company has strong fundamentals and a diverse business.

Yahoo! (YHOO ): Reiterates 4 STARS (buy)

Analyst: Scott Kessler

Following a partnership announced in January, Yahoo and Verizon Communications (VZ ; S&P investment rank 4 STARS; recent price, $33) launched a joint DSL service for $14.95 per month with an annual service agreement. We believe this offering will enable Yahoo to attract more fee-paying users and generate high-margin revenues. We think comparable arrangements with SBC Communications (SBC ; 3 STARS, hold; $24), BT Group (BT ; 2 STARS, sell; $40), and the Rogers Cable unit of Rogers Communications (RG ; not ranked; $37) have been beneficial for Yahoo. We also expect the growing alliance with Verizon to lead to greater opportunities in the mobile area, where Yahoo already works with Verizon Wireless.

Amylin Pharmaceuticals (AMLN ): Maintains 3 STARS (hold)

Analyst: Frank DiLorenzo, CFA

Amylin announces positive Phase II results for exenatide LAR, a once weekly formulation of Byetta (twice daily) for type 2 diabetes. Twelve of fourteen patients receiving high dose of LAR achieved A1C levels of 7% or less at 15 weeks. We think LAR could be approved by the second half of 2008, and are upping our view of its success chances to 50% from 30%. We still see 2005 loss at $1.61, but widen 2006's to 81 cents loss from 59 cents on higher development costs. On higher probability for LAR and combined peak Byetta/LAR sales $1.6 billionby 2013, net par value analysis boosts our 12-month target price $6, to $31.

Pier 1 Imports (PIR ): Reiterates 3 STARS (hold)

Analyst: Michael Souers

Pier 1 Imports lowers August-quarter guidance to a net loss of 12-14 cents, citing its expectation of an August same-store-sales decline of 13%-15%. This is the second downward guidance revision this quarter, as traffic levels have been extremely weak. While we think Pier 1 Import's planned catalog offering in September could boost sales and renew interest in its stores, we still envision a multitude of challenges ahead for the company. We are lowering our fiscal year 2006 (February) and fiscal year 2007 EPS estimates to 12 cents and 45 cents, from 22 cents and 55 cents, as well as our 12-month target price to $14 from $15.

TRW Automotive (TRW ): Reiterates 2 STARS (sell)

Analyst: Efraim Levy, CFA

We are initiating our 2006 EPS estimate for TRW at $2.16. Despite lower vehicle production at domestic automobile manufacturers, valuations of auto parts producers have improved. Based on a p-e of 12 times our 2006 EPS estimate, we are raising our 12-month target price to $26 from $21. This is still a discount to an adjusted peer-average p-e, reflecting projected weaker operating margins. In addition, S&P Core Earnings adjustments reduce 2005 operating EPS by more than 50%, compared with an adjusted peer average of 7%. With the stock trading above our target price, our recommendation is sell.

Harman International (HAR ): Reiterates 4 STARS (buy)

Analyst: Amy Glynn, CFA

After reviewing our model, we are increasing our fiscal year 2006 (June) earnings per share estimate to $3.86 from $3.80, above company guidance of $3.80. We are raising our target price to $120 from $103, based on p-e-to-growth of 1.24, or 31 times our fiscal year 2006 EPS estimate. We think a premium multiple is warranted based on our view of Harman's high revenue visibility, widening margins, and consistent performance. Despite a 30% rise in the shares over the past week, we continue to like Harman for its market leadership position in providing high-end infotainment systems to original equipment manufacturers, and our recommendation remains buy.

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