Citigroup profits called higher

Citigroup will announce its fourth-quarter results on 15 November, and traders are expecting year-on-year Q4 sales to have increased up to $17.964 billion from last year’s $17.805 billion.

Source: Bloomberg

At the same time the company’s earnings per share is anticipated to have slipped from $1.16 down to $1.092. However, the company’s pre-tax profits are set to leap from $1.373 billion last year, up to $5.411 billion.

Revenue streams from Citigroup’s equity trading departments should continue to capitalise on the efforts of central banks to support markets. The European Central Bank has now taken over the baton of quantitative easing from its US counterparts. Equity markets might increasingly be an area with questionable valuations, but as an investment sector it continues to hold top billing.

Of more concern will be Citigroup’s exposure to the oil markets and the possibility of prices remaining at these low levels for longer than had initially been anticipated. The broader global exposure that Citigroup has, with more than half its revenue streams coming from outside the US is not as comforting a fact now as it has been in recent times. The majority of this global exposure comes from Asia and Latin America.

Support from institutional analysts remains strong for Citigroup with 28 buy recommendations, five holds and no sell recommendations. The average 12-month price target for the company is $63.48, offering a 34% premium from the current share price of $47.35 (at the time of writing).

It is worth noting the different stages of the recovery cycle US banks are at in comparison to their UK counterparts as Lloyds, Royal Bank of Scotland and Barclays are all very close to their 52-week lows.

Technical analysis from Joshua Mahony MSTA, Market Analyst at IG.

Citigroup shares have been on a downward trajectory since the July 2015 peak of $60.94. Last week saw price close back below the key support level of $47.19, providing a significant warning sign that a top could be building.

The crucial level of note is $45.11, which if broken would provide a strong bearish signal given that this represents the final support level of note from the last 30 months. However with price currently moving higher from $46.00, there is a strong likeliness that we could see a rally in the meantime to regain some of the ground lost last week.

With that in mind, a bearish view would only return to prominence should we see a close below $45.11, with an extension of this current bounce expected in an hourly close above $39.00.

Key resistance levels of note are $49.00, $49.71, $50.70 and $53.00, with support levels at $45.11, $41.60 and $40.00. 

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