Citigroup Inc (NYSE:C) — This large-cap financial services company provides a wide selection of financial products to corporate customers and consumers in over 100 countries. Although revenues and earnings may not reach this year’s original estimates, Standard & Poor’s is keeping its highest rating (five-star buy) on the stock, estimating that earnings per share will rise to $5.08 in 2017 from $4.78 in 2016.
They also forecast that Citigroup will continue to strengthen its global system in consumer and corporate lending. The company reported third-quarter EPS of $1.34, which was above the Capital IQ consensus, but earnings were not as high as some expected due to the Federal Reserve’s delay in raising short-term rates.
Nevertheless, S&P has a 12-month target of $56 on the shares, and Credit Suisse analysts have a target at $55, noting that credit quality and consumer trends have been stable in the face of adversity. The stock pays an annual dividend of 64 cents per share for a dividend yield of 1.3%.
Since my Aug. 8 recommendation to buy C at $45, the stock made several new highs and advanced to $50.60 on Oct. 27, where it flashed a short-term (low-volume) sell signal. However, since August, the pattern has evolved into a bullish Cup-and-Handle formation, and in September it confirmed a bull market by executing a Golden Cross.
Volume, before the last five days, has been dominated by buyers, Therefore, with a rate hike in December almost inevitable and the impact on Citigroup positive, buy C at $47.50 with a minimum trading target of $55 for a proposed gain of over 15% by Dec. 31.
Investors should consider Citigroup as a long-term hold with the potential of higher annual growth.
