Earnings Previews: Citigroup, JPMorgan, Morgan Stanley, UnitedHealth, Wells Fargo
The three major U.S. equity indexes closed mixed on Tuesday. The Dow Jones industrials ended the day up 0.12%, the S&P 500 closed 0.65% lower, and the Nasdaq ended down 1.10%. Seven of 11 sectors closed lower, with communications services (1.63%) and tech (1.52%) posting the biggest losses. Real estate and consumer staples posted the greatest gains, 1.02% and 0.93%, respectively.
The Bank of England’s announcement that it would be buying gilts until Friday gave traders the jitters. Then one of the central bank’s governors told pension funds they needed to rebalance by Friday as well.
The producer price index rose 0.4% month over month in September, ahead of a consensus estimate for a rise of 0.2%. Last month’s drop was 0.1%. Minutes of the last FOMC meeting will be released in the afternoon.
All three major indexes opened higher on Wednesday.
Before markets opened Wednesday morning, PepsiCo reported better-than-expected earnings and revenue. The company also raised fiscal year earnings per share (EPS) guidance. Shares traded up by about 2.7% in the premarket.
September-quarter earnings reporting season hits the ground running before markets open on Thursday. BlackRock, Delta Air Lines, Taiwan Semiconductor and Walgreens are all posting quarterly results.
Here is a look at five companies set to report their quarterly results first thing Friday morning.
Citigroup
Shares of Citigroup Inc. (NYSE: C) have dropped by nearly 44% over the past 12 months. The stock posted its 52-week low on Tuesday and its 52-week high almost exactly a year ago.
Citi CEO Jane Fraser has begun a restructuring aimed at regaining lost ground in investment banking and has been beefing up its European advisory group. Combined with added loan-loss reserves, profits are likely to be underwhelming at the six largest U.S. banks. Earlier this week, Bloomberg estimated that Citi and the five other biggest U.S. banks will report salting away another $4.5 billion in loan-loss reserves during the third quarter. Demand for loans continues to grow, but the overall economy raises questions about loan losses. If Bloomberg’s forecast is realized, the six largest U.S. banks will have increased their loan-loss provisions in three consecutive quarters.
Of 24 brokerages covering the company, nine have a Buy or Strong Buy rating and 14 have a Hold rating. At a recent price of around $40.50 a share, the upside potential based on a median price target of $54.00 is 33.3%. At the high price target of $83.00, the upside potential is about 105%.
Third-quarter revenue is forecast at $18.25 billion, which would be down 4.7% sequentially but up 6.4% year over year. Adjusted EPS are forecast at $1.50, down nearly 35% sequentially and by 30.2% year over year. For the full 2022 fiscal year, analysts are forecasting EPS of $7.21, down 28.9%, on revenue of $75.2 billion, up 4.6%.
Citigroup stock trades at 5.6 times expected 2022 EPS, 5.7 times estimated 2023 earnings of $7.15 and 5.1 times estimated 2024 earnings of $7.98. The stock’s 52-week trading range is $40.92 to $73.22, and Citi pays an annual dividend of $2.04 (yield of 4.9%). The total return to shareholders for the past year was negative 41.6%.
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