C

Citigroup Lags Peers in Key Metrics

by

Image Source: Matt Buck By Matthew Warren Cititgroup’s (C) third-quarter report, released October 15, showed revenue of $18.57 billion, which beat consensus by $30 million and non-GAAP EPS of $1.97 which beat by $0.02. GAAP EPS of $2.07 beat by $0.12. Revenue in the quarter was up only 1%, as currency headwinds lowered overall reported growth rates. The efficiency ratio worsened slightly to 56.3% from 56.1% in last year’s quarter. On this key metric, the bank lags its money center peers. Similarly, it lags peers with respect to return on tangible common equity (ROTCE), too, which came in at 12.2% in the quarter, though this metric has improved markedly under the current management team. Earnings before taxes were down 1%, but … Read more

ICYMI: Interview with Valuentum’s President Brian M. Nelson, CFA

by

Catch up with Valuentum’s President Brian M. Nelson, CFA in a recent interview with dividend growth investor Arne Magnus Lorentzen Ulland of the blog stockles. By Brian Nelson, CFA Recently, I was interviewed by Arne Magnus Lorentzen Ulland of the blog stockles. Arne is a dividend growth investor like many of you, and I sincerely hope you enjoy the interview he put together. I’m very grateful for his interest. His questions were fantastic. We discuss why and how I incorporate independence and integrity into the service at Valuentum. We go into detail regarding why Valuentum views stocks the way it does, and how Valuentum combines enterprise valuation and the information contained in prices in its stock-selection process. I discuss the pitfalls … Read more

Join the Conversation on the Market Plunge

by

The Valuentum team shares its thoughts on the recent surge in volatility and collapse in interest rates amid a trade and currency war between two of the largest economies in the world, the US and China. No changes to the newsletter portfolios at this time. During the past few days, the US (SPY, DIA) and China (FXI, MCHI) have escalated a trade war, turning it into a currency war, the latter allowing its yuan to drop to lower levels against the U.S. dollar. The US has now labeled China a “currency manipulator,” and China has responded by suspending U.S. agricultural purchases. China is one of the largest buyers of U.S. agricultural goods. The Valuentum team builds on its previous conversation … Read more

In the News: Second-Quarter Earnings Season Marches On

by

We like what we saw out of a few industrial names, including Honeywell, Danaher and Dover. We thought Taiwan Semi’s report was okay, and Philip Morris continues to navigate declining cigarette volumes. We include our thoughts on some of the mid-size banks. By Brian Nelson, CFA For those just catching up, please have a read of our introductory second-quarter earnings season piece here. We saw some nice reports from J&J (JNJ) and Abbott (ABT), and while we had some concerns about the core industrial economy in light of Fastenal’s (FAST) and CSX’s (CSX) reports, news from Honeywell (HON), Danaher (DHR), and Dover (DOV) suggest that industrial activity is more likely mixed than outright deteriorating. Honeywell’s second-quarter results, released July 18, … Read more

Citigroup Still Has A Lot to Prove

by

  Image Source: Citigroup Quarterly Presentation  By Matthew Warren On July 15, Citigroup (C) reported Q2’19 revenues up 2% year over year to $18.8 billion and adjusted earnings (excluding a gain on its investment in Tradeweb) of $1.83, or 3 cents better than consensus estimates. Expenses in the quarter were down 2%, yielding the 11th consecutive quarter of positive operating leverage and improving efficiency ratios, which currently stands at 56% in the quarter. This has helped boost return on tangible common equity (RoTCE) to 11.9% in the quarter and the first half of the year, quite close to management’s commitment of 12% for the full year. Management has also stated a goal of reaching 13.5% for the same metric for … Read more

Excerpt: Big Six Banks as a Yield Play?

by

An article excerpt from our monthly High Yield Dividend Newsletter. Order the High Yield Dividend Newsletter here. To continue reading… become a member of the High Yield Dividend Newsletter today! —– Banks – Regional and Asset Management: AB, AINV, AMP, ARCC, BCH, BEN, BGCP, BKU, BLK, BMO, BNS, CM, FSIC, ISBC, KKR, LAZ, LM, MAIN, MTB, NABZY, NYB, OCN, PBCT, PFG, PSEC, RY, SBNY, SBSI, STT, TD, VLY, WBK  Banks & Money Centers: AXP, BAC, BBT, BK, C, DFS, FITB, GS, HBC, JPM, KEY, MS, NTRS, PNC, RF, STI, TCF, USB, WFC Related: XLF, KBE, KRE —– Valuentum members have access to our 16-page stock reports, Valuentum Buying Index ratings, Dividend Cushion ratios, fair value estimates and ranges, dividend reports and more. … Read more

Markets Swooning, Expect Extreme Volatility, Finger on Put-Option Trigger

by

Image shown: We notified members December 26 that we had  moved  the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio to a “fully invested” position, from a 30% and 20% cash “weighting” at the high end of the range, respectively.  — No change to simulated newsletter portfolios…at this time.  — Hi everyone, — Hope you’re navigating these tumultuous markets well.   — If you recall, during the holiday season last year, we had moved the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio to “fully invested.” See image above (point of the arrow). Because many members were traveling and out of the office, not all were able to read the notification until a week or two after. They were … Read more

Taking a Fresh Look at Goldman Sachs

by

After taking a fresh look at our valuation assumptions in the context that Goldman hasn’t really proven that it can earn above the cost of capital through the economic cycle, we have lowered our fair value estimate to $200 per share. By Matthew Warren Goldman Sachs (GS) reported first-quarter 2019 results April 15 with revenue down 13%, to $8.8 billion, and diluted earnings per share down 18%, to $5.71. Return on equity was a middling 11.1% and return on tangible common equity was 11.7%. The bank’s standardized common equity Tier 1 ratio is 13.7%, well above large bank peers. This makes sense as Goldman holds substantial investment positions such as private equity holdings on its balance sheet, which have the … Read more

Raising Our Fair Value Estimate for Bank of America

by

Image shown: Valuentum’s fair value estimates for its banks and money center coverage. We’ve raised our fair value estimate of Bank of America. The only thing not to like with Bank of America is that banks are cyclical and the economy is overdue for a downturn. Everything else is going right at Bank of America. We have raised our fair value estimate for Bank of America to $35 per share. By Matthew Warren Bank of America (BAC) reported first-quarter 2019 results April 16, with revenue stable at $ 23 billion, pre-tax income up 4% to $8.8 billion, and thanks to 7% fewer shares outstanding, earnings-per-share was up 13% versus last year’s first quarter. It was again the crown jewel consumer … Read more

Citigroup Remains a Sub-scale US Bank

by

Image Source: Matt Buck Even if Citigroup achieves improved return-on-capital targets, it would remain a sub-scale US bank from a nationwide perspective, and it remains overly reliant on Corporate and Investment banking, which is an overtraded and competitive field globally. By Matthew Warren Citigroup (C) reported middling first-quarter results April 15, with revenues down 2% versus last year, to $18.6 billion. Thanks to strong operating expense control (-3%), lower taxes, and a 9% lower share count, earnings per share advanced 11%, however. With a common equity tier 1 ratio of 11.9%, Citigroup was able to return over $5 billion to shareholders in the quarter. The bank reported a 11.9% return on tangible equity in the quarter, barely better than the … Read more