NEW YORK (TheStreet) -- Shares of Citigroup (C) are gaining by 0.65% to $57.01 in Tuesday's afternoon trading session after analysts at Bernstein predicted a bull market for U.S. bank stocks, The Wall Street Journal reports.
The firm cited several reasons for the positive outlook.
Banks will hold up well if rates increase, "given market expectations regarding their asset sensitivity." Also, unlike rival sectors, profit margins at banks are not at their peak, the firm noted.
The firm did admit that banks are no longer the profit engines of the past, a result of regulation and compliance, but there is room for improvement for profit.
Lastly, large-cap bank stocks are trading at 12.4x forward earnings, in line with historical averages of 12.2x forward earnings.
Along with Citigroup, JPMorgan (JPM) was one of Bernstein's two best picks, thanks to a combination of low valuations, trading exposure and dividend yields.
Separately, TheStreet Ratings team rates CITIGROUP INC 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 some important positives, 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 net income, expanding profit margins, solid stock price performance and growth in earnings per share. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Commercial Banks industry average. The net income increased by 21.0% when compared to the same quarter one year prior, going from $3,943.00 million to $4,770.00 million.
- 41.91% is the gross profit margin for CITIGROUP INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 20.95% trails the industry average.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- CITIGROUP INC has improved earnings per share by 23.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CITIGROUP INC reported lower earnings of $2.19 versus $4.25 in the prior year. This year, the market expects an improvement in earnings ($5.48 versus $2.19).
- C, with its decline in revenue, slightly underperformed the industry average of 0.1%. Since the same quarter one year prior, revenues slightly dropped by 4.3%. 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