The following are three stocks that present an attractive buy opportunity post their recently reported results.
Linear Technology Corporation (NASDAQ:LLTC): Linear Technology Corporation designs, manufactures and markets various analog integrated circuits. LLTC’s reported better-than-expected second-quarter earnings with an EPS of $0.41 vs. consensus estimate of $0.39. December quarter’s revenue, operational expenditure and margins were all better than estimates. Although second-quarter bookings were slow, they strengthened sequentially in December vs. November. The company’s order book remains strong and management has given a strong sales guidance for Q3. Linear is a high quality company with industry leading margins, high return on capital and a good dividend yield of 3.2%. I believe it is a good buy given the improving trends going forward.
Wells Fargo (NYSE:WFC): Wells Fargo and Company provides retail, commercial and corporate banking services primarily in the United States. It operates in three segments; Community Banking, Wholesale Baking and Wealth, Brokerage and Retirement.
WFC reported fourth-quarter EPS of $0.73 against the market consensus of $0.72. Revenue of $20.1 billion improved 6% quarter-quarter driven by mortgage results and spread income fee. Net Interest Income was also better than expected and loan growth was positive. A combination of lower funding costs and an increase in non-interest bearing deposits has resulted in better interest margins.
WFC remains one of the safest large-cap banking stocks with a relatively strong balance sheet. Its business fundamentals are going in the right direction with improved core loan growth and healthy deposits growth. WFC’s asset quality is stable and NPAs reduced by $879 million last quarter. Its capital ratios also continue to improve: Tier 1 common ratio at the end of Q4 was 7.49% under Basel III standards, up by 9bp quarter-quarter, while under Basel I it was 9.46%, up by 12bp quarter-quarter. WFC has also entered into an agreement to buy back 5.6 million shares in Q1 2012. While high operating expenses are a concern, the management reiterated that expense improvement is expected to occur in 2012. I recommend going long on the stock from a medium- to long-term perspective.
Citi Group (NYSE:C): Citigroup, Inc., a global financial services company, provides consumers, corporations, governments, and institutions with a range of financial products and services. The company operates through two segments, Citicorp and Citi Holdings.
Citi reported a weak quarter, missing consensus expectations. Earnings per share was $0.38 against an expectation of $0.49 while expenses rose by 4% and core revenue fell by 7% quarter-quarter. However, this earnings miss was largely driven by the Investment Banking and Securities division. Going forward, things are expected to improve in Q1 with a seasonal rebound in trading, lower expenses, and a likelihood of a dividend increase and buyback announcement in mid-March.
After yesterday’s decline and with valuations at ~50% discount to tangible book value, I believe a lot of negatives are already factored into the stock price. I believe Citigroup can be a good long for aggressive investors with a high risk-high reward appetite. With broader macros improving and eurozone uncertainty reducing I believe the stock can see a significant upside from here.