By: Brendan Gilmartin, VP Content & Research
Citigroup (NYSE:C) is scheduled to report 2Q 2013 earnings before the opening bell on Monday, July 15. 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. The earnings also come after Friday's strong releases from JPMorgan Chase (NYSE:JPM) & Wells Fargo (NYSE:WFC).
Outliers & Strategy
- Citigroup typically provides two separate figures for Earnings Per Share - Earnings Per Share Excluding Items and Net Earnings Per Share. Earnings Per Share Excluding Items is typically the figure that compares with consensus estimates. (Refer to the Historical Extractions sheet for additional insight).
- Selerity will also be publishing a separate measure for Revenues: Revenues Ex-Items. This new measure will take into account top-line results, including debit valuation adjustment (DVA).
- Citigroup is expected to post earnings of $1.18 per share (Low: $1.08 / High: $1.23). Revenues are forecast to come in at $19.79 bln, a 6.1% increase from the year-ago period. (Source: Yahoo! Finance)
- In light of the recent gains, Citigroup needs to deliver EPS in the $1.30-$1.40 range in order to sustain the momentum. Options traders are currently pricing in a roughly 3.3% move off the earnings, consistent with historical performance.
- Despite the recent run-up, Citigroup shares are at a steep discount to tangible book value of $52.35 per share (as of 1Q 2013).
- Stronger than expected results from JPMorgan Chase & Wells Fargo have pushed the bar higher for Citigroup.
- 07/08: Raymond James published a note to clients, advising them to buy big banks ahead of earnings, according to a report on Barron's Online. In the case of Citigroup, the firm has a Strong Buy rating and earnings estimates above consensus.
- 05/22: According to StreetInsider.com, Credit Suisse raised its price target on Citigroup from $53.00 to $60.00.
- 04/25: Citigroup declared a quarterly dividend of $0.01 per share. The Board of Directors also approved a $1.2 billion common stock repurchase program through the first quarter of 2014.
Citigroup shares have been rallying in recent months, gaining more than 26.56% YTD. Just since mid-June, the shares are up more than 10% thanks to the improving market backdrop and broader advance in the major averages. Should earnings surprise to the upside, look for the shares to retake the recent highs near $52.00/$53.00 (52-week high was $53.56 on 05/30). Conversely, support is at the 50-Day SMA near $50.00, with downside risk to $48.00. (Chart courtesy of StockCharts.com)
Citigroup shares have been rallying over recent weeks, touching the highest level in several years. An improving economic backdrop in the U.S., ongoing restructuring efforts, stronger fundamentals, including rising Return on Equity, 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, stronger than expected earnings Friday from Wells Fargo and JPMorgan Chase imply that strong earnings for Citigroup are priced in ahead of its release, leaving the shares somewhat vulnerable to even the slightest disappointment.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.