Citigroup (C) has put up solid earnings growth this year, but as global tensions rattle its big clients and key markets, investors might have reservations about scooping up C stock.
XCitigroup stock today is nowhere near pre-recession heights, and with more business concentrated outside the U.S. than its big-bank rivals, it's more vulnerable to friction abroad. As with other banks, its profits suffer when the Federal Reserve cuts interest rates.
Below, we dive into whether Citigroup stock is worth buying right now.
C Stock Fundamental Analysis
The best stocks, by IBD's standards, are capable of turning out consistent earnings growth. The last time Citigroup's earnings declined was in 2016. Since then, the bank kept earnings positive.
In 2018, the company grew earnings by 25%. Analysts expect Citi to grow earnings by 16% in 2019 and slow to 9% next year.
During the third quarter, Citigroup's results were mixed, with earnings per share beating estimates but revenue just missing. But an important profitability gauge, return on tangible common equity, hit 12.2%, above the bank's target for 12% this year.
However, revenue growth for the bank, the third largest by market value, has been in the single digits this year. Sales grew 1% during the third quarter. That compares to 2% growth during the second quarter and a 2% decline in the first quarter, as trading activity remained muted after a brief market scare in December of 2018.
A reorganization effort could also swing future earnings and revenue growth. Last year, Citigroup reworked its U.S. retail-banking business to work more closely with its credit-card business, in an effort to re-accelerate both. Citigroup also is reportedly fusing its investment banking business with its capital markets division.
Citigroup Stock Technical Analysis
C stock, as of December, was extended past a 70.84 buy point of a cup-with-handle base. The stock has drifted higher since Citi's third-quarter earnings report in October.
Citigroup has set up in, and then cleared, cup-with-handle bases three times this year. But the stock's action was uneven as lower interest rates, a wobbling global economy and the oscillations of U.S.-China trade-war talks affected investor sentiment.
Citigroup's relative strength line, which compares a stock's performance with the S&P 500, has trended downward since 2017. Bank stocks in general have trouble outperforming the S&P 500. JPMorgan Chase (JPM) has largely trailed the benchmark index since 1986.
However, Citigroup stock is above its 50-day line. Its Composite Rating is 89. Its EPS Rating is a strong 92. IBD encourages investors to look for stocks with Composite Ratings in the 90s.
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Lower Interest Rates, Trump Trade War Weigh On C Stock
Conflicted market sentiment over the economy's direction, rate cuts from the Fed and President Donald Trump's trade war with China have chipped away at gains bank stocks made after Trump's election.
"The environment is highly unpredictable, given how much of it is at the mercy of political machinations, whether it's trade negotiations or even the elusive resolution on Brexit," Citigroup CEO Michael Corbat said during the bank's earnings conference call in October.
The Federal Reserve has trimmed its key interest rate in an effort to recharge the U.S. economy, which has been strong but has also shown signs of slowing. When that rate moves up or down, banks' interest rates on their own loans typically move in tandem.
Additionally, during the Q3 call, management cited a "slower growth environment" in Citigroup's biggest non-U.S. business, Mexico, where Citi offers retail banking services and card products. Earlier this year, Citigroup said "client sentiment has become more cautious" under the leadership of leftist President Andres Manuel Lopez Obrador. But it said a slowdown in GDP wasn't abnormal in a post-election year.
Elsewhere, Citigroup said investor sentiment "continued to improve" in Asia, where it serves areas like Hong Kong and nations like India, Australia and Korea. The brighter outlook in Asia helped the bank's wealth management business. The bank said it expected continued sales growth in its global consumer business for the fourth quarter.
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Citigroup Stock Is Not A Buy, For Now
Even amid global friction, Citigroup was still putting up double-digit earnings-per-share gains during the year, while revenue growth ticked lower.
However, the stock is extended beyond buy range. Moreover, the RS rating for C stock is in the 80s, projected earnings growth for next year will slow to the single digits, and revenue growth has been anemic. Investors should also note that C stock, as with other bank stocks, rarely outperforms the market for extended periods. And the Banks-Money Center industry group, of which Citigroup stock is a member, stands at 62 out of 197 groups tracked by IBD.
Bottom line: C stock is not a buy right now, based on IBD's research and MarketSmith analysis.
Investors seeking growth stocks to buy might want to look elsewhere. Check out IBD Stock Lists and other IBD content to find dozens of the best stocks to buy or watch.
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The post Is Citigroup Stock A Buy Right Now? Here's What Earnings, C Stock Chart Show appeared first on Investor's Business Daily.
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