Stock Summary: Citigroup (C)

Notes:
Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash



Today Citigroup announced and held their 2014 second quarter results.  They managed to beat analyst estimate on both earnings ($1.24/share) and revenues ($19.3B).  Additionally, they announced that they've settled legal issues with the government with their role in the sale of mortgage backed securities at a cost of $7 billion, which was lower than the many 10 billion quotes and demands I was seeing in news reports.  These are all positive results and the stock has popped due to expectations being too low compared to how the company is performing.  The company didn't expand on any details regarding the reasons as to why the Federal Reserve rejected their capital allocation plans in the stress test earlier this year and they've provided guidance that the Net Interest Margin (NIM) will stay flat for the rest of the year - essentially stating that we can't expect much for growth in 2014.  This is essentially in line with what I've been expecting and we are left spending the year with Citi trying to do better than analysts expect for the stock to rise.  As such, the stock price has and will improve, but my price target remains at $51.  As we continue to move forward, the key factor to stock price will be the trend of the yield on 10-year treasuries and what that translates into projected EPS estimates for 2015.  At this point, I continue to rank the stock as a 3 based on it's proximity to my target price and fact that I don't anticipate many catalysts to move the stock in the near-term.  In the long-term, banks will be the place to be as interest rates rise and Citigroup is relatively cheaper than most peers and is still valued under tangible book value.  There's a real chance for price appreciation in 2015 and beyond, if you're willing to sit and wait for it.