2024-07-19 11:17:50 ET
Summary
- Citigroup beats Q2 estimates with revenue and earnings exceeding analyst expectations, driven by strong performance in Markets and Investment Banking.
- Despite concerns about higher costs for FY 2024, Citigroup's outlook remains strong, with FY EPS likely expanding to $6.05 and ROCE to >10%.
- Following the earnings beat, the fair implied share price for Citigroup is calculated at $92, leading to a strong "Buy" rating.
- Following Citigroup’s earnings beat, I have adjusted my residual earnings model and now estimate a fair implied share price of $92.
Citigroup (C) reported earnings for the June quarter on July 12th, comfortably beating analyst consensus estimates on both revenue and earnings. However, despite the strong results, shares declined by almost 2% as Citigroup warned that costs for the FY 2024 may come in at the higher end of the range. Now, while I do acknowledge that cost is a focus point for investors when drafting an equity story for the bank, I also highlight that an investment opportunity should be judged holistically on the underlying asset's earnings potential. On that note, the thesis for Citigroup looks to strengthen with EPS up 14% YoY in Q2, and ROCE expanding to 7.2% vs 6.4% for the same period one year earlier. In my view, Citi's sell-off following the earnings report looks like a buy the rumor, sell the news event, similar to what we have seen with Q1 -- when the Citi's shares dropped following earnings only to recover quickly and chase new YTD highs. Following Citi's earnings beat, I slightly tweaked my residual earnings model for Citi and now calculate a fair implied share price equal to $92. I reiterate a strong "Buy" rating....
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Citigroup: Strong Performance Points To Sustained Upside Momentum