Market Overview

Citigroup Earnings Preview: Falling Expectations for EPS

Citigroup (NYSE: C) is scheduled to report fourth-quarter 2011 results tomorrow, January 17, before the markets open. Investors may be less optimistic about the lender's results after competitor JP Morgan Chase (NYSE: JPM) offered disappointing results on Friday. And Wells Fargo (NYSE: WFC) recently predicted that Citigroup's fourth-quarter results would be hurt by several one-time charges.

Analysts are looking for Citigroup to report that its per-share earnings came to $0.49 for the quarter, and that revenue totaled $18.5 billion. That compares to $0.40 per share on $18.4 billion in the same period of last year. And note that the EPS estimate has tumbled from $0.82 some 60 days ago. But analysts have underestimated Citigroup's per-share earnings in all but one of the past seven quarters.

For the full year, the consensus estimates call for $3.82 per share earnings, an increase of 8.4% from the previous year. But that EPS estimate also has fallen over the past 60 days. And revenues are expected to have slipped 7.9% year over year to $79.7 billion.

The Company

This New York-based global financial services company operates in two segments. Its Citicorp segment operates as a global bank for businesses and consumers. Its Citi Holdings segment operates brokerage and asset management, local consumer lending, and special asset pool businesses. The company was founded in 1812 and now is an S&P 500 component with a market cap of $89.9 billion.

During the three months that ended in December, the company announced that it will sell its Belgian consumer franchise, Citibank Belgium SA. It also announced the sale of its EMI Music and EMI Music Publishing subsidiaries.

Performance

Citigroup has a long-term earnings per share growth forecast of 10.5%. Its P/E and PEG ratios are less than the industry average, and the dividend yield is 0.1%. Short interest is only 1.5% of the float. Eighteen of 28 analysts who follow the stock rate it a Buy or Strong Buy. Their mean price target on shares is 26.7% higher than the current share price.

The share price is up more than 14% in the past month but still down more than 40% from the 52-week high. It is currently above the 50-day moving average but thus far below the falling 200-day moving average. Over the past six months, the stock has underperformed competitor JP Morgan but outperformed Bank of America (NYSE: BAC).

See also: What to Expect from Bank Earnings.

ACTION ITEMS:

Bullish: Investors interested in exchange traded funds invested in Citigroup might want to consider the following trades:

  • Market Vectors Bank and Brokerage ETF (NYSE: RKH) is more than 30% higher than the recent IPO.
  • iShares Dow Jones US Financial Services (NYSE: IYG) is more than 28% higher than the 52-week low.
  • Rydex S&P Equal Weight Financials (NYSE: RYF) is more than 27% higher than the 52-week low.
  • Rydex S&P 500 Pure Value (NYSE: RPV) is more than 24% higher than the 52-week low.
Bearish:

Traders may prefer to consider these alternative positions in the same industry:

  • PNC Financial (NYSE: PNC) is up more than 46% from the 52-week low.
  • Wells Fargo (NYSE: WFC) is up more than 31% from the 52-week low.
  • Royal Bank of Canada (NYSE: RY) is up almost 23% from the 52-week low.
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Posted-In: analyst forecasts Bank of AmericaEarnings Long Ideas News Short Ideas Previews Trading Ideas

 

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