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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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SYM TRADE IT LAST %CHG
BAC $15.94 0.57%
C $51.79 0.08%
CYT $74.08 0.12%
KCG $11.02 -0.99%
NBL $30.21 -0.43%

Markets

Chart of I:DJI
DOW 16,374.76 +23.38 0.14%
S&P 500 1,951.13 +2.27 0.12%
NASDAQ 4,733.4970 -16.4820 -0.35%

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