Trading to Aid Citigroup (C) Q2 Earnings Amid Coronavirus Woes

Citigroup C is scheduled to report second-quarter 2020 results, before the opening bell, on Jul 14.

The outbreak of the novel coronavirus created volatility in the markets during second-quarter 2020, resulting in higher client activities. Thus, Citigroup’s fixed-income revenues, which constitute nearly 30% of total revenues, are expected to have registered growth.

At a conference held last month, the company’s CFO Mark Mason stated, “Businesses seeing continued high volumes and active portfolio repositioning across our entire client franchise.”

Other Factors at Play

Consumer Banking Revenues Lower: Citigroup is likely to have witnessed strained consumer banking revenuesdue to a slowdown in economic activities. Global card fees might have been hurt considerably on lower consumer spending on account of shutdowns and travel restrictions.

Investment Banking (IB) Fees of Less Support: Global M&A activities during the second quarter were significantly hampered due to the coronavirus outbreak. Thus, Citigroup’s advisory fees are likely to have been negatively impacted in the quarter to be reported.

However, relatively strong equity market performance, especially rise in follow-up equity issuances, and higher investment-grade issuance in debt capital markets during the quarter might have supported growth in equity and debt underwriting fees.

Overall, the consensus estimate for IB fees of $1.20 billion indicates an 11.1% fall from the previous quarter’s reported number.

Net Interest Income (NII) Growth Muted: The Federal Reserve’s move to lower interest rates to near-zero level in March to support the U.S. economy from the coronavirus outbreak-induced slowdown might have dampened banks’ net interest margin.

However, per the Fed’s latest data, the lending scenario was decent during the quarter on a year-over-year basis, with support from higher commercial and industrial.

The Zacks Consensus Estimate for NII of $11.26 billion suggests a 5.8% fall from the year-ago reported figure.

Reserve Build Higher: At a virtual conference, Citigroup’s CEO Mike Corbat pointed out that the company will continue to build reserves and that the second-quarter level is expected to be “a bit above where we were in terms of the first quarter.”

Here is what our quantitative model predicts:

Citigroup has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Citigroup is +46.32%.

Zacks Rank: Citigroup currently carries a Zacks Rank of 3.

The Zacks Consensus Estimate for its earnings of 49 cents suggests a 73.2% decline on a year-over-year basis. Further, the consensus estimate for sales of $17.91 billion indicates a 4.5% fall from the prior-year quarter’s reported figure.

Citigroup Inc. Price and EPS Surprise

 

Citigroup Inc. Price and EPS Surprise

Citigroup Inc. price-eps-surprise | Citigroup Inc. Quote

Other Stocks That Warrant a Look

Here are some other stocks that you may want to consider, as according to our model these too have the right combination of elements to post an earnings beat this quarter.

Comerica Incorporated CMA is expected to release quarterly results soon. The company currently has an Earnings ESP of +6.90% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Earnings ESP for Bank of America Corporation BAC is +31.66% and it carries a Zacks Rank of 3 currently. The company is expected to report quarterly numbers in the coming days.

Bank of Hawaii Corporation BOH is likely to report quarterly earnings soon. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +0.73%.

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