Investors have begun to ask, is it time to take profits or do the shares have more legs to run up to $60? I don't disagree there are still plenty of risks here.
While trying to repair its damaged brand in the U.S., management has been working to repair Citigroup's global presence, which has come under attack by JPMorgan Chase (JPM). Not to mention the fact that Citigroup has been losing share to both Wells Fargo (WFC) and Bank of America (BAC) in overall loan growth during a period where Citigroup has recently installed Michael Corbat as CEO.
Even so, as with Wells Fargo and Bank of America, I've remained bullish on Citi's revival for quite some time. There were no reasons to waver. Plus, the Street can no longer discount the pace of Citi's recovery, which is well ahead of management's schedule.Now, with the housing recovery in full swing, I don't see any reason to change my outlook on the stock, especially as the once-sluggish interest rate environment is suddenly beginning to improve. If Citi's recent earnings results serve as indication, there's nothing standing in the way of this stock from going higher. Heading into the quarter, the Street was looking for $1.17 in earning per share on revenue of $19.68 billion, which would have represented year-over-year EPS growth of 17% and 6% growth on revenue. These expectations were too high, at least I thought. Citigroup, which for the quarter posted a 42% increase in net income, had other ideas. Revenue surged 11%, almost doubling some analysts' estimates. Even more impressive is that even when scrutinizing the results for things like the debt and credit valuation adjustments, Citigroup still beat earnings-per-share estimates by 8 cents, which represents 25% year over year growth. I'm not suggesting that Citi is now free and clear from the risks that I've mentioned above. What is clear, though, is that management has figured out ways to create value by focusing on credit-cost reduction and growing income from banking fees.
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