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Is it Advisable to Add Citigroup to Your Portfolio Right Now?

Performance of major banks in third-quarter 2018 was quite impressive. Favorable economic data, the Fed’s recent rate hikes and tax-reform bill benefits boosted investors’ confidence in banking stocks. Therefore, some of these stocks can be profitable additions to your portfolio, supported by robust fundamentals and encouraging long-term prospects.

Thus, this is the right time to add a few banking stocks to your portfolio. Today, we bring one such stock — Citigroup C — that continues to depict strong fundamentals and improving prospects. This bank appears to be a solid bet right now due to its sound organic growth strategies. Also, the company witnessed prudent expense management, along with increasing loan and deposit balances, over the last few years.

Further, this Zacks Rank #2 (Buy) stock has appreciated more than 16% in the past two years compared with 19.5% growth registered by the industry.

In addition, the Zacks Consensus Estimate for its current-year earnings has been revised 1.5% upward, over the past 60 days.

Why Citigroup is a Golden Egg

Revenue Strength: Though revenues remained volatile over the past few years, the figure recorded 2% year-over-year improvement in 2017, and 1% in the first nine months of 2018. We expect the bank to record significant growth in revenues in the near term as well, with continued economic recovery and focus on core operations with strategic actions.

Additionally, the company’s projected sales growth of 3.2% for 2018 ensures continuation of the upward revenue trend.

Earnings Per Share Growth: Over the past three to five years, Citigroup witnessed earnings per share (EPS) growth of 8.1%. Notably, the company also delivered an average positive earnings surprise of 5.48%, over the trailing four quarters.

Furthermore, earnings momentum is likely to continue in the near term as indicated by the company’s projected EPS growth rate of 25.5% for the current year.

Prudent Expense Management: The New York-based lender has been successful in reducing expenses at a CAGR of 9.2% over the last four years (ended 2017), with the help of branch closures and wind-down of legacy assets. Such cost-management initiatives will support the bank’s bottom-line growth.

Impressive Capital Deployment: The company’s 2018 capital plan received the Federal Reserve’s approval, following which the company raised its quarterly dividend to 45 cents per share, up 40.6% from the current payout in July 2018. Moreover, it has a share-repurchase program of up to $22 billion in place. These activities reflect its capital strength and commitment toward rewarding shareholders.

Stock seems Undervalued: Citigroup seems undervalued when compared with the broader industry. Its current price-to-earnings (F1) and price-book ratios are lower than the respective industry averages.

Other Stocks to Consider

Greenhill & Co., Inc. GHL has been witnessing upward estimate revisions for the past 60 days. Moreover, this Zacks #1 (Strong Buy) Ranked stock has rallied more than 27%, year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.

JPMorgan JPM has been witnessing upward estimate revisions for the past 60 days. Further, the company’s shares have gained nearly 3.6%, year to date. Currently, it carries a Zacks Rank of 2.

Great Southern Bancorp, Inc. GSBC has been witnessing upward estimate revisions for the past 60 days. Additionally, the stock has jumped around 5.7% year to date. It currently carries a Zacks Rank #2.

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JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report
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