April 14, 2014
Recommendation: D-rated Sell
Welcome to the Stock of the Day for April 14, 2014. Let's take a moment to review Citigroup Inc. (C), which is rising following this morning's first-quarter earnings announcement. Citigroup shares have had a rough year so far, but is this a sign of better times to come? Or is it time to take profits? Find out today.
Company Profile: Headquartered in Manhattan, Citigroup is the third-largest bank in the U.S. in terms of total assets. While the company's roots stretch back over two hundred years, Citigroup as we know it was formed in 1998 through the merger of bank Citicorp and financial conglomerate Travelers Group. Notably, Citi holds more Spanish debt than any other U.S. bank, and it was hit particularly hard during the 2008 financial crisis. This year is shaping up to be a lukewarm year for the bank, with sales expected to decline 0.6% over 2013 and earnings forecast to rise just 7.3%.
Earnings Buzz: Before the opening bell today, Citigroup reported that net income rose 4% year-over-year to $3.96 billion. Adjusted earnings weighed in at $1.30 per share, which beat the $1.14 consensus estimate by 14%. Over the same period, adjusted revenues declined 1% to $20.12 billion. Excluding special items, revenue came in at $20.12 billion, topping the $19.37 billion consensus estimate. While the company's markets and securities revenues fell 12% and investment banking revenues declined 10%, equity markets revenue jumped 13%. Shares of C opened up following the earnings announcement.
Current Ratings: Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. This Conservative ranked stock has declined significantly in my rating tool over the past several months. As recently as August this stock was a buy. However, since then Citigroup has deteriorated in terms of both fundamentals (C Fundamental Grade) and buying pressure, which measures the stock's risk-to-return ratio (F Quantitative Grade). When it comes to fundamentals, Citigroup has a mixed track record. It earns As on operating margin growth, earnings growth and cash flow, but it fails on sales growth, earnings surprises and analyst earnings revisions. The other two metrics (earnings momentum and return on equity) receive Cs.
Bottom Line: As of this posting, April 14, I consider C a D-rated Sell. It may be upgraded to a hold once I plug the latest earnings data in, but I wouldn't count on a buy recommendation anytime soon.
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