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The Zacks Analyst Blog Highlights: Citigroup, Bank of America, JPMorgan Chase, Capital One Financial and Skechers

Zacks Equity Research

For Immediate Release
Chicago, IL – August 05, 2014 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Citigroup Inc. (C-Free Report), Bank of America Corp. (BAC-Free Report),  JPMorgan Chase & Co. (JPM-Free Report), Capital One Financial Corp. (COF-Free Report) and Skechers U.S.A., Inc. (SKX-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Monday’s Analyst Blog:

Citigroup Curbs Russian Exposure, May Be at Risk with Argentina

In its latest regulatory filing, Citigroup Inc. (C-Free Report) revealed that it has reduced the company’s exposure in Russia by a further 5.3% to $8.9 billion as of Jun 30, 2014.  Notably, at the end of first-quarter 2014, the bank reported an 8.7 % decline in its Russian exposure to $9.4 billion.

The latest move comes as part of Citigroup’s efforts to safeguard it from potential risk arising from the persisting instability in Russia and Ukraine. In order to end the Russian military intrusion in Crimea and bring stability in eastern Ukraine, the U.S. and EU have enforced sanctions on Russia. Citigroup apprehends that enforcement of further sanctions such as asset freezes, involving Russia or against Russian entities, businesses, and individuals or otherwise, could adversely affect the business.

Citigroup conducts operations in Russia through a subsidiary of Citibank N.A. As of Jun 30, 2014, it had net investment in Russia of around $1.8 billion, up 5.9% from the prior quarter. As of the same date, the subsidiary’s total third-party assets stood at around $7.7 billion, up 6.9% from the prior quarter.

These third-party assets comprise corporate and consumer loans, local government debt securities, and cash on deposit with the Central Bank of Russia. The company also stated that around $2.8 billion of its exposure is held in non-Russian subsidiaries of Citigroup.

Citigroup also has cut its exposure in Ukraine. As of Jun 30, 2014, the company’s net investment in Ukraine stood at around $100 million, down 23.1% from first-quarter 2014. Total third-party assets of the Ukraine Citibank subsidiary declined 167.7% from the prior quarter to around $500 million.

Among others, Bank of America Corp. (BAC-Free Report) in its latest regulatory filing stated that its net exposure to Russia was $3.94 billion, plunging over 40% from $6.72 billion at the end of Dec 2013 and down from $5.21 billion at the end of Mar 2014. At the end of first-quarter 2014, JPMorgan Chase & Co. (JPM-Free Report) stated that it lowered its exposure in Russia by 13% to $4.7 billion.

Headwinds from the Argentina Default

On a separate development, Argentina defaulted on its debt after a 30-day grace period on a $539 million interest payment expired on 30th Jul, 2014 owing to court orders. The court orders related to the ongoing litigation between Argentina and certain ‘holdout’ bond investors who refused to accept restructured bonds in the restructuring of Argentine debt following the nation’s default on its sovereign obligations in 2001. Though Argentina transferred funds to the trustee for payment of its Jun 30, 2014 obligations on the restructured bonds, such payment was restricted by court orders.

Citigroup mentioned in the filing that Argentina’s default would further worsen the nation’s economic scenario and could adversely affect the company’s revenues and funding costs. Also, it will restrict the company to hedge against its investments in Argentina. Additionally, the situation could make it vulnerable to legal hassles because of its role of a custodian in the country for certain restructured bonds that are currently covered by court orders.

Further, Citigroup stated that it may incur a loss of around $80 million if U.S. regulators downgrade Argentina.

Citigroup currently carries a Zacks Rank #3 (Hold). Capital One Financial Corp. (COF-Free Report) is a better-ranked stock with a Zacks Rank #1 (Strong Buy).

Skechers Unveils Bullish Picture on Solid Earnings Backdrop

On Jul 26, 2014, Zacks Investment Research upgraded Skechers U.S.A., Inc. (SKX-Free Report) to a Zacks Rank #1 (Strong Buy) on solid earnings backdrop. Shares of this designer, developer, marketer and distributor of footwear, jumped 8% since second-quarter 2014 earnings announcement on Jul 23.

Why the Upgrade?

For Skechers, 2014 is turning out to be an exceptional year. After a robust first quarter performance, the company yet again came up with stellar second quarter results, and since then has been witnessing rising earnings estimates. The quarterly earnings came in at 68 cents a share that fared significantly better than the Zacks Consensus Estimate of 41 cents and the prior-year quarter earnings of 14 cents on the back of strong top-line growth and effective cost management.

Increased demand for products and their innovation across multiple categories as well as a healthy performance across all revenue channels led to a 37.1% rise in net sales to $587.1 million in the quarter, which handily surpassed the Zacks Consensus Estimate of $505 million.

Skechers is now showing signs of stability, having delivered positive earnings surprise in the three successive quarters — 65.9% in the second quarter of 2014, 84.9% in the first quarter and 64.7% in the fourth quarter of 2013.

With more emphasis on a new line of products, increased backlog, cost containment efforts, inventory management and margin improvement, the company anticipates sustained growth momentum in 2014. We believe Skechers, through its distribution networks, subsidiaries and joint ventures is poised to enhance its global reach in the footwear market.

Following the sturdy results, the Zacks Consensus Estimate for 2014 and 2015 increased by 17% and 11.2% to $2.41 and $2.99, respectively, in the last 30 days.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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