Konrad raised his price target for Citigroup to $44 from $40, saying that even though the stock appeared "cheap" at 64% of tangible book value and 7.8 times his 2013 earnings estimate, the "primary drivers" of the upgrade included "1) expectations for continued run-off of Citi Holdings following QE3; 2) improving Basel III capital ratio; 3) expectations for capital deployment in 2013; and 4) expectations for continued market share gains in global trade finance."
Citigroup's shares closed at $32.75 Monday, returning 25% year-to-date, following a 44% decline during 2011.
The company will report its third-quarter results on Oct. 15, with analysts polled by Thomson Reuters estimating a profit of 98 cents a share, compared to EPS of a dollar the previous quarter, and $1.23 a year earlier.Konrad left his third-quarter EPS estimate for Citi unchanged at 89 cents, but raised full-year 2012 estimate by a nickel to $3.79, and his 2013 estimate to $4.25 from $4.10, "largely due to our increased assumptions for the speed of Citi Holdings run-off assets." The analyst's revised assumptions included reduced credit losses and subsidiary losses. Konrad also introduced a 2014 EPS estimate of $4.50 and a 2015 EPS estimate of $5.25. "Although valuation is an important part of our upgrade thesis," he said, "we believe the execution of Citi's strategic plan, recent visibility of earnings, and growth in global payments have been recent drivers in the company's performance. In addition, we believe the economic backdrop may put Citi in a comparative advantage to reduce Citi Holding assets and enable the
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