Citigroup Rises 23.6% QTD: Will the Rally Continue in 2H20?

Shares of Citigroup C have jumped nearly 24% quarter to date compared with the industry’s rally of 11.8%. The stock has also surpassed the S&P 500’s rally of 20.4% in the same frame.

Notably, the recent price performance of this Zacks Rank #3 (Hold) stock compares favorably with the disappointing start to 2020. The company’s shares lost 47.3% in the first quarter mainly due to the coronavirus outbreak-induced mayhem.

With expectations of a rebound in the U.S. economy in the second half of this year on a gradual return to normal business activities and rising hopes of finding a vaccine to counter the coronavirus. Moreover, fundamentally solid prospects, driven by revenue growth, expense management, steady capital-deployment activities and inorganic expansion strategy, are likely to continue supporting the company’s stellar performance.

Quarter-to-Date Performance

 

 

Let’s check out some of the key factors in detail.

Prudent Cost Management: Citigroup has been successful in controlling costs in the past few years on the back of branch closures and winding down of legacy assets. Further, the bank slashed costs through layoffs in fixed-income and stock-trading divisions in 2019. Considering the COVID-19 outbreak, it expects a natural reduction in some volume-related expenses, including T&E, meeting and event costs.

Strong Balance Sheet Position: As of Mar 31, 2020, the company had a debt level of $707.4 billion and debt-capital ratio of 0.58 (compared with the industry average of 0.52), which have been increasing over the past few quarters. Nevertheless, with a time-interest-earned ratio of around 2.4X over the past few quarters and a record of consistent earnings, Citigroup carries low credit risk and has a lesser likelihood of default of interest and debt repayments if the economic situation worsens.

Growth Initiatives: The company continues to execute growth strategies, such as making entry into the booming digital consumer payments industry and expanding its global market presence, thereby, aiming to diversify revenue sources. This is also reflective of management’s focus on enhancing Citigroup’s performance.

Impressive Capital Deployment: Driven by a solid capital position, the company remains committed toward enhancing shareholders’ value on steady capital-deployment activities. It increased its quarterly dividend by 13.3% last July. Though it has temporarily suspended share buybacks through the second quarter of 2020, following the “unprecedented challenge” from the coronavirus pandemic; the annual stress test results due later this week will give a clearer picture for the quarters ahead. We believe that the company’s financial strength will continue to inspire investors’ confidence in the stock.

Earnings Strength: Citigroup’s earnings have witnessed a 12.3% rise in the past three-five years. The momentum is anticipated to continue in the next few years. The company’s long-term (three-five years) expected earnings growth rate of 10.5% promises rewards for shareholders.

Favorable Zacks Industry Rank: Citigroup is part of the industry, which currently carries a Zacks Industry Rank #83 (Top 33%).

Better-Ranked Stocks to Consider

Zions Bancorporation’s ZION 2020 earnings estimates have been revised 2.2% upward over the past 60 days. This Zacks Rank #2 (Buy) company’s shares have lost 30.7% over the past six months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings estimates for First Republic Bank FRC have moved 2% north over the past 60 days for the ongoing year. The company’s shares have declined 5.7% over the past six months. It currently has a Zacks Rank of 2.

Earnings estimates for GAIN Capital Holdings GCAP have moved significantly north over the past 60 days for the ongoing year. The company’s shares have rallied 49.8% over the past six months. It carries a Zacks Rank of 2 at present.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

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