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Why Citigroup (C) Is Down Today

NEW YORK (TheStreet) -- Citigroup  (C) continued to decline on Friday after Atlantic Equities downgraded the stock to "neutral" from "overweight." The firm cited concerns that rising interest rates would put pressure on emerging markets revenue and that the lender does not have much room left to cut costs.

The firm lowered its 2014 and 2015 earnings per share estimates to $4.96 and $5.58, respectively, both of which are below consensus. Atlantic Equities also lowered the target price to $55 from $59.

Citigroup was down 2.31% to $49.55 on Friday.

In related news, Chief Financial Officer John Gerspach announced Thursday the company would stop operating Korean branches that aren't near large cities, according to Bloomberg.

The New York-based lender, whose international consumer bank is the largest among U.S. lenders, will release the costs for the changes later this year, according to Gerspach. Citigroup has been amending its plans in Korea for the last 18 months in an effort to diversify its portfolio, he said. The company has noted that Korea will cause a drag on Asian revenues throughout 2014.

Citigroup CEO Michael Corbat has tried to improve returns by reducing the consumer operations in some countries and instead focusing on wealthier clients in major cities throughout the world. Gerspach said this restructuring should make sure that the branches "are more aligned with that urban-type of strategy. We have done some of that, but hope to do that in earnest this year."

TheStreet Ratings team rates Citigroup as a "buy" with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate CITIGROUP INC (C) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, impressive record of earnings per share growth, compelling growth in net income, attractive valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • CITIGROUP INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CITIGROUP INC increased its bottom line by earning $4.33 versus $2.47 in the prior year. This year, the market expects an improvement in earnings ($5.29 versus $4.33).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Diversified Financial Services industry. The net income increased by 125.0% when compared to the same quarter one year prior, rising from $1,196.00 million to $2,691.00 million.
  • C, with its decline in revenue, underperformed when compared the industry average of 13.4%. Since the same quarter one year prior, revenues slightly dropped by 5.6%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: C Ratings Report

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