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2 Stellar Stocks for Earnings Season

I scoured the landscape and came up with a dozen stocks that topped quarterly profits by at least 20%. Here they are...

You can quickly spot some clear themes from this group. For example, Bank of America (BAC - Get Report) and Citigroup (C - Get Report) soared past estimates. Both trade below book value and both have very low price-to-earnings (P/E) ratios.

That's where the similarities end. Bank of America only exceeded forecasts because of a reversal of previous loan write-downs and a lower-than expected tax rate. Dig deeper into the quarterly results, and you'll find a still-troubled bank with ongoing legal headaches. Citigroup, on the other hand, is getting healthier, despite my recent mea culpa that an expectation of a big stock rebound was quite premature.

Shares have rallied 20% since that sobering update, and the quarterly upside was delivered through good old-fashioned business improvements and not one-time accounting gimmicks. When the dust finally settles over the troubled banking sector, investors are likely to refocus on tangible book value as a measure of a financial sector stock's worth.

Merrill Lynch pegs that figure at $61 a share for Citigroup -- twice the current price. It may take some time to get there, but this still looks to be a very inexpensive stock, and Citigroup may well benefit from the distress -- and subsequent retrenchment -- from rivals both in the United States and in Europe.

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BAC $15.62 -0.16%
C $53.04 0.26%
CYT $56.18 -0.90%
KCG $13.00 -0.69%
NBL $49.90 -1.20%


DOW 18,075.17 -4.97 -0.03%
S&P 500 2,112.40 -5.29 -0.25%
NASDAQ 5,063.2140 -28.8710 -0.57%

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