Citigroup's (C) earnings results are encouraging to many on Wall Street, but not enough to avoid an inauspicious post-earnings stock move.
Shares of the bank have been volatile on Monday as the earnings report released in pre-market hours did not meet the high bar set by results from J.P. Morgan (JPM) on Friday and concerns on the road-map ahead have overshadowed the overall earnings beat.
"Once you saw J.P. Morgan be great, you realize everyone is going to be hurt by comparison," Action Alerts PLUS portfolio manager Jim Cramer commented on Monday morning.
Luckily for investors following the Action Alerts PLUS team, the stock implications felt at Citi was foreseeable in this light.
"We expected Citigroup to not be as good [as JPM], accompanied with a Monday decline due to its run up last Friday on JPM euphoria," the Action Alerts PLUS team noted. "We communicated this outlook during our members only conference call last Friday. Longer term, the firm is still well capitalized, and the stock is cheap with it trading barely above tangible book value per share."
The team concluded that the results from the bank simply weren't inspiring enough to provoke buying action with relatively uninspiring numbers, but explained that it's not a stock to give up on.
"We'll keep our ONE rating on the stock, but our more directional view is to be buyers when the stock falls below its tangible book value per share which now sits at $65.55," the team concluded.
More optimistically, the Wall Street consensus price target sits at $76.50 following the results as analysts appear to believe in the turnaround story touted by CEO Michael Corbat, despite its slow progression.
"Overall, the ROE was 10.2% and RoTCE was 11.9%, both of which are good results and are showing steady progress," Atlantic Equities analyst John Heagerty said.
The progress is a positive as the company guides to further improvement for the full year.
"We continue to prepare for a range of operating environments with a focus on achieving our full-year ROTCE target of 12% for 2019," Corbat explained to analysts on Monday. "For the full year, we continue to expect modest revenue growth, flattish expenses, and higher but manageable cost to credit combined with continued balance sheet and capital optimization to drive improved returns for our shareholders."
Heagerty added that efficiency is progressing and could keep that target achievable as the company moves toward the low 50's long term target that management has set.
"The efficiency ratio of 57.0% was down 90 basis points year over year and was 40 basis points better than consensus," he said. "Management continues to control costs well."
Additionally, the trading results in equities that stung the segment were buoyed by fixed income results that reflected the best performance so far among the big banks.
Nonetheless, the stock move on Monday appears to indicate that Citi simply isn't motivating the market to get behind the bank.
For reference, the bank has not made an earnings day stock move of more than 4% since 2015, as just 'good' isn't good enough to provoke a stock pop at this point.
For more on what the charts indicate could be next for Citi stock, click here.