Q1 Preview: Citi (C) Set to Beat as Trading Revenue Should Have Rebounded

April 13, 2012 3:40 PM EDT
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Price: $56.11 -0.97%

Rating Summary:
    18 Buy, 12 Hold, 3 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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Shares of Citi (NYSE: C) are leading the Financial sector lower Friday ahead of the company's first-quarter earnings report on Monday morning. The stock last traded at $33.31, down more than 3.8 percent from Thursday's close, compared to a 1.7 percent decline in the Financial Select Sector SPDR ETF (NYSE: XLF).

Analysts are expecting Citi to post quarterly earnings of $1 per share on sales of $19.85 billion. The bank reported earnings of just 9 cents per share on sales of $19.7 billion during the same quarter last year.

According to data from StreetInsider.com, Citi has missed by about 2 percent on average over the last six quarters.

Shares of Citi are up nearly 30 percent since the beginning of 2012, but are down about 13 percent from the recent high set in mid March.

Bloomberg data shows 22 analyst firms rate shares of Citi at Buy, five suggest to stay on the sidelines, and five recommend selling the stock. The average price target on Citigroup shares sits at $42.50.

During Citi's last quarter, the Fed released results of its latest stress test which showed the bank was one of just four US banks which did not get clearance for the submitted capital plan. While peers in the sector were announcing fresh buybacks and boosting dividends, Citi said it will submit a revised plan to the Fed later this year.

Analyst Commentary:
  • JPMorgan - Although the firm is somewhat optimistic on Citi over the long term, JPMorgan noted the Fed's rejected capital plan removes a likely key catalyst for the stock in 2012.

    The firm recently boosted its first-quarter EPS estimate on Citi from $1.08 to $1.15. Maintains a Neutral rating and $43.50 target on the stock.

  • Deutsche Bank - Looking for earnings of $1.19 per share. The firm said its estimate "reflects a meaningful q/q rebound in capital markets revenue (particularly within FICC) and lower expenses, given the lack of some one-timers this quarter vs. 4Q and lower investment spend." Deutsche Bank warned this quarter will contain some lumpiness amid a number of previously-disclosed sales. Excluding special items related to trading, the firm said Citi's trading revenue "should rebound sharply..."

    Deutsche Bank maintains a Buy rating and $40 target.

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