Citigroup Earnings Preview: Keeping an Eye on Revenue

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CitigroupC
, which did surprising well in the latest round of the Fed's stress tests, is scheduled to report its first-quarter 2013 results Monday, March 15, before the markets open. Investors will be keeping an eye on revenues, as competitors
J.P. MorganJPM
and
Wells FargoWFC
both fell short of consensus revenue estimates when they reported their first-quarter results last week.
Expectations
Analysts on average predict that Citigroup will report that revenue for the quarter rose almost four percent year-over-year to $20.17 billion. Earnings of $1.17 per share are also in the consensus forecast. That would be up from a reported profit of $1.11 per share in the comparable period of last year. But note that the consensus earnings per share (EPS) estimate has slipped in the past 60 days from $1.19. And Citigroup has fallen short of consensus EPS estimates in two of the past six quarters. The earnings miss back in the fourth quarter was by about 28 percent. The company attributed the disappointing fourth-quarter results in part on "issues like spread compression and regulatory changes -- as well as the costs of putting legacy issues behind us." But deposits and loans both increased seven percent year-over-year. The share price climbed about four percent in the week following the fourth-quarter report. Looking ahead to the current quarter, the forecast thus far calls for EPS up marginally year-over-year to $1.13. But that EPS estimate is three cents higher than it was 60 days ago. And revenue for the quarter is expected to be more than five percent higher to $19.61 billion. Full-year revenue, though, is so far expected to be less than two percent higher year-over-year.
The Company
Citigroup provides financial products and services such as consumer banking, corporate and investment banking, securities brokerage, wealth management and transaction services to consumers, corporations, governments and institutions worldwide. It operates more than 4,000 branches in about 39 countries. The company was founded in 1812, and its headquarters are in New York City. It is a component of the S&P 500, and it now has a market capitalization of about $136 billion. Michael L. Corbat has been chief executive officer since October 2012, when former CEO Vikram Pandit was ousted. Competitors J.P. Morgan and Wells Fargo reported better-than-expected first-quarter EPS last week, but as mentioned above, revenues fell short of consensus estimates.
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Bank of AmericaBAC
is expected to report strong earnings growth and solid revenues, relative to the same period of last year, when it reports on Wednesday. During the three months that ended in March, Citigroup's CEO set a new management team, and the company settled a lawsuit by investors and also disclosed the results of its annual stress test as required by the Federal Reserve Board. The Fed also asked Citigroup to improve its money laundering controls.
Performance
Citigroup has a long-term EPS growth forecast of about 12 percent, but its price-to-earnings (P/E) ratio is higher than the industry average. The operating margin is less than the industry average, and the return on equity is only about four percent. The current dividend yield is about 0.1 percent. The number of Citigroup shares sold short, as of the March 28 settlement date, represents less than two percent of the float. That is the second highest level of short interest so far this year. Days to cover remains at less than two. Of the 31 analysts surveyed by Thomson/First Call who follow the stock, 26 of them recommend buying shares, with nine of those rating the stock at Strong Buy. The analysts' mean price target, or where they expect the stock to go, is more than 13 percent higher than the current share price. That would be a level the stock has not seen since 2009. The share price is less than nine percent higher year-to-date, after pulling back about nine percent from a recent multiyear high. The share price currently is above the 50-day and 200-day moving averages. Over the past six months, the stock has outperformed rivals J.P. Morgan and Wells Fargo, as well as the broader markets.
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Posted In: EarningsLong IdeasShort IdeasPreviewsTrading IdeasBank of AmericaCitigroupJ.P. MorganWells Fargo
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