We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Will Citi (C) Stock Remain Under Stress Post Q2 Earnings?
Read MoreHide Full Article
Citigroup Inc.’s (C - Free Report) earnings estimates have been going down ahead of its second-quarter earnings release on Friday, Jul 15, 2016. Does it indicate disappointing numbers from Citi this time around?
The backdrop has been tough for U.S. banks since the beginning of the year. Concerns over the Chinese economic slowdown, continued volatility in commodity prices and the prevailing low interest rate environment have taken a horrendous toll on the industry. This made Citi report a 27% year over year decline in earnings from continuing operations in the first quarter, but it managed to beat the Zacks Consensus Estimate, thanks to analysts’ conservativeness.
However, industry wide weakness and global concerns were further fueled by the recent Brexit referendum which took a toll on the bank stocks with Citigroup falling more than 16% year to date.
Will the upcoming earnings release put further pressure on Citi stock? It majorly depends on whether the firm is able to maintain its trend of beating earnings over the last four quarters.
However, our quantitative model doesn’t call for an earnings beat this time around. Here is why:
A stock needs to have the right combination of the two key criteria – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) – for increasing chances of an earnings beat. Unfortunately, this is not the case here, as elaborated below.
Zacks ESP: The Earnings ESP for Citigroup is 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at $1.09.
Zacks Rank: Citi’s Zacks Rank #4 (Sell) lowers the predictive power of ESP. We caution investors against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement.
What to Expect in Q2
Management guides stable net income: Last month, at a conference in New York, Citigroup’s Chief Executive Officer, Mike Corbat revealed that net income for the second quarter is expected to be almost stable with first-quarter 2016. This, however, translates in about a 28% decline on a year-over-year basis. Notably, the bank reported net income of $3.50 billion in the first quarter of this year while in the second quarter of 2015 net income was $4.85 billion.
Soft growth in investment banking and trading revenues: Following the broader trend of slump in investment banking revenues in the first quarter, the picture seems to be marginally better in the second quarter. Citigroup expects trading and investment-banking revenue for the quarter to increase slightly on a sequential basis.
Reduced consumer banking revenues: Consumer business revenue is expected to decline slightly on a sequential basis due to the absence of a one-time gain experienced in retail services. Notably, management expects to achieve revenue growth on a year over year basis in the existing U.S. branded cards and Asia cards businesses in the second half of 2016. While the company stands to benefit from the acquisition of the Costco portfolio, the second quarter is not likely to have any impact as the deal was completed in June.
Continued pressure on net interest margin: As the Fed did not take any step in raising the interest rates further, the company is not likely to record improvement in its NIM in second quarter. NIM was 292 bps during first-quarter 2016. Management expects NIM to be moderately stable at this level in the second quarter.
Continued cost control to ease expense burden: The firm expects to achieve around $400 million of total savings during the remainder of the year due to the repositioning actions undertaken in the first quarter. Repositioning costs should exhibit downward trends in the upcoming release. Notably, core operating expenses are likely to remain flat sequentially in the second quarter. Management believes regulatory and compliance costs to be trending towards stability.
Easing legal woes: While Citi has resolved several litigation issues during the quarter, such settlements were covered by existing reserves. Hence, the company’s earnings are not likely to have any material impact.
Benign energy headwinds: During the first quarter 2016, most of the company’s credit costs were related to the energy portfolio. However, given the rebound in oil prices that hit rock bottom in February, the provision to cover potential losses tied with energy portfolio should not be significant.
The activities of Citigroup during the quarter have not been able to win analysts’ confidence as evident from the six downward revisions in earnings estimates (versus no upward revision) over the last 30 days. Among the estimates that moved south, three were seen in the last seven days. The Zacks Consensus Estimate has been revised 8% downward over the last one month.
Stocks that Warrant a Look
Here are some stocks worth considering, as they have the right combination of elements to post an earnings beat this quarter.
Comerica Incorporated (CMA - Free Report) , which is expected to report on Jul 19, has an Earnings ESP of +1.47% and a Zacks Rank #3.
Regions Financial Corporation (RF - Free Report) has an Earnings ESP of +5.00% and a Zacks Rank #3. The company is scheduled to release results on Jul 19.
Federated Investors, Inc. has an Earnings ESP of +2.13% and a Zacks Rank #3. It is scheduled to report results on Jul 28.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Will Citi (C) Stock Remain Under Stress Post Q2 Earnings?
Citigroup Inc.’s (C - Free Report) earnings estimates have been going down ahead of its second-quarter earnings release on Friday, Jul 15, 2016. Does it indicate disappointing numbers from Citi this time around?
The backdrop has been tough for U.S. banks since the beginning of the year. Concerns over the Chinese economic slowdown, continued volatility in commodity prices and the prevailing low interest rate environment have taken a horrendous toll on the industry. This made Citi report a 27% year over year decline in earnings from continuing operations in the first quarter, but it managed to beat the Zacks Consensus Estimate, thanks to analysts’ conservativeness.
However, industry wide weakness and global concerns were further fueled by the recent Brexit referendum which took a toll on the bank stocks with Citigroup falling more than 16% year to date.
CITIGROUP INC Price and EPS Surprise
CITIGROUP INC Price and EPS Surprise | CITIGROUP INC Quote
Will the upcoming earnings release put further pressure on Citi stock? It majorly depends on whether the firm is able to maintain its trend of beating earnings over the last four quarters.
However, our quantitative model doesn’t call for an earnings beat this time around. Here is why:
A stock needs to have the right combination of the two key criteria – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) – for increasing chances of an earnings beat. Unfortunately, this is not the case here, as elaborated below.
Zacks ESP: The Earnings ESP for Citigroup is 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at $1.09.
Zacks Rank: Citi’s Zacks Rank #4 (Sell) lowers the predictive power of ESP. We caution investors against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement.
What to Expect in Q2
Management guides stable net income: Last month, at a conference in New York, Citigroup’s Chief Executive Officer, Mike Corbat revealed that net income for the second quarter is expected to be almost stable with first-quarter 2016. This, however, translates in about a 28% decline on a year-over-year basis. Notably, the bank reported net income of $3.50 billion in the first quarter of this year while in the second quarter of 2015 net income was $4.85 billion.
Soft growth in investment banking and trading revenues: Following the broader trend of slump in investment banking revenues in the first quarter, the picture seems to be marginally better in the second quarter. Citigroup expects trading and investment-banking revenue for the quarter to increase slightly on a sequential basis.
Reduced consumer banking revenues: Consumer business revenue is expected to decline slightly on a sequential basis due to the absence of a one-time gain experienced in retail services. Notably, management expects to achieve revenue growth on a year over year basis in the existing U.S. branded cards and Asia cards businesses in the second half of 2016. While the company stands to benefit from the acquisition of the Costco portfolio, the second quarter is not likely to have any impact as the deal was completed in June.
Continued pressure on net interest margin: As the Fed did not take any step in raising the interest rates further, the company is not likely to record improvement in its NIM in second quarter. NIM was 292 bps during first-quarter 2016. Management expects NIM to be moderately stable at this level in the second quarter.
Continued cost control to ease expense burden: The firm expects to achieve around $400 million of total savings during the remainder of the year due to the repositioning actions undertaken in the first quarter. Repositioning costs should exhibit downward trends in the upcoming release. Notably, core operating expenses are likely to remain flat sequentially in the second quarter. Management believes regulatory and compliance costs to be trending towards stability.
Easing legal woes: While Citi has resolved several litigation issues during the quarter, such settlements were covered by existing reserves. Hence, the company’s earnings are not likely to have any material impact.
Benign energy headwinds: During the first quarter 2016, most of the company’s credit costs were related to the energy portfolio. However, given the rebound in oil prices that hit rock bottom in February, the provision to cover potential losses tied with energy portfolio should not be significant.
The activities of Citigroup during the quarter have not been able to win analysts’ confidence as evident from the six downward revisions in earnings estimates (versus no upward revision) over the last 30 days. Among the estimates that moved south, three were seen in the last seven days. The Zacks Consensus Estimate has been revised 8% downward over the last one month.
Stocks that Warrant a Look
Here are some stocks worth considering, as they have the right combination of elements to post an earnings beat this quarter.
Comerica Incorporated (CMA - Free Report) , which is expected to report on Jul 19, has an Earnings ESP of +1.47% and a Zacks Rank #3.
Regions Financial Corporation (RF - Free Report) has an Earnings ESP of +5.00% and a Zacks Rank #3. The company is scheduled to release results on Jul 19.
Federated Investors, Inc. has an Earnings ESP of +2.13% and a Zacks Rank #3. It is scheduled to report results on Jul 28.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>