Citigroup Earnings Preview: Second Quarter 2009

Citigroup [[C]] is scheduled to report their second quarter 2009 results before the market opens on Friday, July 17. Based on our analysis, we at are expecting Citi to report better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $23.33 billion and EPS of ($.24). This would represent a 25% increase in revenues from last year’s $18.65 billion in the same period. The current analyst consensus estimates calls for revenues of $22.42 billion and EPS of ($.26).


Last quarter, Citigroup managed to deliver better than expected results, but credit losses still increased 76% to $10.3 billion. We anticipate the same story playing out in the second quarter with Citi reporting better results than Wall Street is anticipating, but with credit losses continuing to rise.


Citigroup’s large exposure to the consumer credit markets (in particular their mortgage and credit card businesses) will likely lead to further losses in the foreseeable future. Job losses and shrinking incomes are expected to only get worse during the remainder of 2009 and into 2010.


Share Performance

Since the beginning of the year, Citigroup’s shares are down 60%, but are still up considerably from their all-time low of $1.02 set on March 5, 2009. In 2008, Citi’s shares fell 77% and badly underperformed the 34% decline in the Dow Jones industrial average.



Shares are now trading at 21x consensus fiscal 2010 EPS estimates. This is above the relative valuations of their peer group. Despite the fact that Citigroup’s shares has pulled back almost 30% since mid-May, the stock remains the most speculative of the financial group.


Recommendation: Hold with a $3 price target.


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