By: Brendan Gilmartin
Citigroup (NYSE:C) is scheduled to report 4Q 2012 earnings before the opening bell on Thursday, January 17. The results are expected to come through at approximately 8:00 a.m. EST with a conference call to follow at 11:00 a.m. Citigroup has the potential to impact the broader market indices, including the S&P Index Futures and corresponding ETFs.
Outliers And Strategy
Citigroup is expected to post earnings of $0.96 per share (Low: $0.84 / High: $1.09). Revenues are forecast to come in at $18.82 bln, a 10% decline from the year-ago period. (Source: Yahoo Finance)
Citigroup shares are currently trading at a steep discount to tangible book value of $51.80 per share (as of 3Q 2012).
01/04: Goldman Sachs added Citigroup to the Conviction Buy List according to a post on StreetInsider.com and raised the price target from $42 to $49. The firm cited earnings power and ongoing restructuring efforts.
12/19: Morgan Stanley upgraded Citigroup to an Overweight rating and increased the price target from $45 to $51, according to a post on Benzinga.com. The firm cited improving Return on Equity in 2013 and beyond.
12/18: Meredith Whitney Advisory upgraded Citigroup from Hold to a Buy rating, according to CNBC.com. Among the potential catalysts include authorization from the Federal Reserve in March to allow banks to return capital to shareholders in the form of dividend increases and share buybacks. Citigroup currently pays a $0.01 quarterly dividend.
12/05: In a presentation to investors and analysts, Citigroup CFO John Gerpsach told attendees at the Goldman Sachs Financial Services Conference there is strong momentum in the core franchise, with a focus on continued winding down of Citi Holdings and plans to return capital to shareholders.
12/05: Citigroup said it was cutting more than 11,000 positions as part of an effort to reduce expenses and improve efficiency. Due to this repositioning, Citi expects to record pre-tax charges of approximately $1 billion in the fourth quarter of 2012.
Citigroup shares have been rallying in recent months, gaining nearly 25% since early December. In the past week, however, the rally stalled out in the $42.00/$43.00 area - a signal that buyers are somewhat fatigued in the wake of the run-up. Nevertheless, a solid earnings release could lift the shares out of this tight trading range, with little resistance in sight. Conversely, there is support at $40.00, with downside risk to $38.00/$39.00. (Chart courtesy of StockCharts.com)
Citigroup shares have been rallying over recent weeks, en route to the highest level since mid-2011 on a split-adjusted basis. An improving economic backdrop in the U.S. following the fiscal cliff resolution, ongoing restructuring efforts, stronger fundamentals, including rising Return on Equity (ROE), a new management team, and expense controls are among the factors contributing to the recent gains. Against this positive backdrop, look for earnings to therefore come in at the upper end of consensus forecasts. Flat to in-line results could trigger a "sell the news" scenario, while earnings below Street estimates would be seen as a major disappointment in the context of the recent advance. Finally, earnings from JPMorgan Chase and Bank of America could influence the direction of Citigroup ahead of its release.
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