By Craig Bowles
Citigroup (NYSE:C) is scheduled to report 2Q 2014 earnings before the opening bell on Monday, July 14th. The results are expected to come through at approximately 8:00 a.m. EST with a conference call webcast at Citigroup Investor Relations to follow at 10:00 a.m. Citigroup has the potential to impact the broader market indices, including the S&P Index Futures and corresponding ETFs. The earnings come after Friday's release from Wells Fargo (NYSE:WFC) and before Tuesday's report from JP Morgan Chase (NYSE:JPM).
Outliers & Strategy
- Earnings Per Share Excluding Items: The current Street estimate is $1.08 (range $0.91 to $1.30). The estimate has been reduced from $1.23 three months ago. (Source: Yahoo! Finance) 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.
- Revenues: Analysts expect a decline of 7.6% y/y to $18.92 bln (range $18.58 bln to $19.69 bln).
- Citigroup shares have a price/book of 0.7 similar to the 5-year average and below the industry average of 1.1. The stock trades at 10.7x trailing earnings, above the 5-year average of 8.9x and compares to an industry average of 16.0x.
- Insiders bought 32,707 shares over the last three months and 154,770 shares the last twelve months. Citigroup's board approved a $1.165 bln stock buyback in April after the Fed rejected a proposed a $6.4 bln buyback due to failing stress tests.
- Citigroup shares have a 1-day average price change on earnings of 3.12%. Options are pricing in an implied move of 2.90% off earnings.
- 07/09: Morgan Stanley lowered their Q2 EPS estimate for Citigroup's to $0.40 from $1.10 following news suggesting a $7 billion investor fraud settlement -$4 billion hard-dollar (higher than the prior $1.3 billion estimate) and a $3 billion soft dollar, according to a post on Benzinga.com.
- 06/24: Fed gives Citigroup and three other banks more time to resubmit capital distribution plans after problems in this year's round of stress tests, according to a post by Investors Daily.
- 06/23: Citigroup agreed to sell its consumer banking business in Spain to Banco Popular Espanol SA, according to a post on Bloomberg.com.
- 06/23: Citigroup's provision for credit losses remains relatively high when compared to Bank of America and Wells Fargo, according to a post by TheMotleyFool.com.
- 06/20: Ned Kelly, chairman of Citigroup's investment bank, is leaving the company and will be replaced by Stephen Volk, a vice chairman. Kelly is 61 years old and was Citigroup's CFO for four months during the financial crisis.
- 06/20: CEO Michael Corbat has said he will leave if Citigroup fails another stress test. Meanwhile, the U.S. is demanding a penalty of $10 billion for Citigroup's past issuance of flawed mortgage securities, according to a post by WSJ.com.
- 06/19: Blackrock and Pimco are suing Citigroup, Wells Fargo , HSBC (NYSE:HSBC) and BNY Mellon (NYSE:BK) over their trustee roles for more than 2,000 bonds between 2004 and 2008, according to a post on Bloomberg.com.
Citigroup has fluctuated around $47 the last few months, so is still close to last year's second half $48 support. A one year chart of the big banks shows Citi has lagged in 2014 and would need to rally around 10% to reconnect. Last year's second half range could act as resistance up to $52.50 and limited support below $46 raises fears of an elevator shaft scenario. (Chart courtesy of StockCharts.com)
Citigroup shares have shown little movement amid continued legal settlements. The bank still has over $50 bln in deferred tax assets which can enhance future earnings, however. Given reduced estimates, Citigroup's stock could get a bounce if earnings come in above $1.17 and if revenue is closer to $19.3 bln.
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