Today's 3 Stock Picks: C, CPB, XRX

Citigroup: Bowing to a Bailout

The folks bailing out Citigroup (C) never sleep. Shares soared after the Monday announcement of the fruits of their labor: a $40 billion package of capital, preferred stock and guarantees for a $306 billion steaming pile of toxic assets that government and company officials hope will shore up the bank.

“We appreciate the tremendous effort by the government to assure market stability,” Citi CEO Vikram Pandit said in a prepared statement.

The news capped a frenetic weekend of negotiations between the bank, the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. to halt Citi's precipitous slide.

"The U.S. government is committed to supporting financial market stability, which is a prerequisite to restoring vigorous economic growth," the agencies said in a joint statement. "In support of this commitment, the U.S. government on Sunday entered into an agreement with Citigroup to provide a package of guarantees, liquidity access and capital."

While the news apparently buoyed investors across the market, Oppenheimer & Co. analyst Meredith Whitney wrote Monday that the specifics of the $306 billion in risky assets were still unclear. She maintained her Underperform rating on the stock.

“We estimate C's risky assets to be roughly $120 billion, but the company has almost $600 billion in consumer and credit card loans," she wrote. "We are unclear exactly which assts were targeted in the $306 billion."

Hamed Khorsand of Beating Wall Street, a stock-research firm, was reassured by the bailout.

"We now consider the Citi issue resolved in a manner that could allow for Citi to continue operations without new hiccups," he wrote Monday.

Bottom Line: Hold
The government move is reassuring in many respects, and pulls Citi back from the brink. Anyone still holding shares should hang on to see how the bank fares when fundamentals return to the equation.

Campbell: A Fly in the Soup

Shares of Campbell Soup (CPB), one of the few stocks in the benchmark S&P 500 index to escape recent market carnage, fell Monday after its results were dinged by a commodity hedging loss.

Excluding that loss, the Camden, N.J.-based food producer beat Wall Street estimates in its fiscal first quarter. Campbell had been a rare bright spot this year, staying mainly positive even as the S&P 500 started to decline in June.

Campbell's controller, Anthony DiSilvestro, said the company took a $26 million unrealized loss on commodity hedges. On the same Monday conference call, CEO Doug Conant said the company had held steady through deteriorating economic conditions and was preparing global expansion into China and Russia, which he said account for 50% of world-wide soup consumption.

"Operationally we're off to a very good start to the fiscal year," he said. "I'm particularly pleased we were able to have solid first quarter performance in an obviously very difficult economic climate."

Andrew Kerr, an analyst at Sadif Analytics, said that while soup may be good low-cost food in budget-conscious times, "the company's growth and management efficiency are below average." General Mills (GIS), he said, is a better bet for the long term.

Bottom Line: Buy
The selloff here may be a bit overdone, and as long as the rest of the market remains unpalatable, these shares could simmer with mild upside.

Xerox: News That's Fit to Print

Shares of Xerox (XRX) rose Monday after the company reaffirmed its 2009 guidance and said it would be able to avoid the battered capital markets next year.

Management expected earnings between $1 and $1.25 a share, falling in line with Wall Street analysts' expectations, which averaged $1.15 a share.

Xerox Chairman and CEO Anne Mulcahy said the Norwalk, Conn.-based company had a backlog of product orders and saw a 14% increase in its document service contract orders, which provided a healthy free cash flow that wards off any need for increasingly scarce and expensive financing in the current credit crunch.

"Our value proposition is supported by the strength of our financial position and the resiliency of our recurring revenue stream," she said at the company's annual investor conference.

In a report covering the company's third-quarter earnings published last month, Morningstar highlighted growth in the company's technological strength. The company earned 29 cents a share for the most recently completed quarter, up from 27 cents a share a year ago.

"Color remains a bright spot for Xerox, alleviating our concern that color printing could be a casualty of difficult economic times," the Oct. 24 report said. "Revenue from color grew 5% from the prior-year quarter and now represents 40% of total revenue."

Bottom Line: Buy
Xerox shares have taken a beating along with the rest of the market, but the company has its fundamentals in good shape and can stay on the sidelines of the credit markets, a factor that sets it apart.