Following the announcement of fiscal 2016 fourth-quarter results on January 18th, the stock of Citigroup Inc (NYSE: C) fell 5% to hit a low of $55.21. However, in the past three trading sessions, the stock regained the lost ground to trade at about $57.62. Notably, the lender’s fourth-quarter revenue missed analysts’ estimates. However, we expect the stock price to increase further due to the facts presented below.
The New York-based company reported fiscal 2016 fourth-quarter adjusted revenues of $17.01 billion, down 9% from $18.64 billion in the similar period of 2015. The reported adjusted revenues were lower than analysts’ estimates of $17.3 billion.
For the quarter ended December 2016, adjusted net income increased 4% to $3.25 billion or $1.14 per share, from $3.18 billion or $1.06 per share in the quarter ended December 2015. Analysts had expected Citigroup to report earnings of $1.12 per share.
The operating expenses decreased 9% y-o-y to $10.1 billion in the fourth quarter of 2016. Loans increased to $624 billion, up 1% from the last year’s similar quarter. On a constant currency basis, loans increased by 3%. Total deposits increased by 2% to $929 billion. On a constant currency basis, deposits increased by 4%.
During the quarter, Citigroup reported a 36% increase in the fixed income market revenue to $3 billion. Similarly, equity markets revenue increased by 15% y-o-y. The allowance for loan losses was $12.1 billion in the fourth quarter, compared with $12.6 a year earlier.
The Common Equity Tier 1 ratio of the bank increased to 12.5% in fiscal 2016, from 12.1% in fiscal 2015.
Analysts anticipate earnings of $1.30 per share on revenues of $18.26 billion for the current quarter. For fiscal 2017, the market is forecasting earnings of $5.23 per share on revenues of $72.82 billion. This compares with earnings of $4.72 per share on revenues of $69.88 billion in fiscal 2016.
So far, the sellers have made three valiant attempts to break below the major support level of 56. However, none of them succeeded and the stock has bounced off the support with a positive gap. The stochastic oscillator has also risen above the bearish zone. So, we can expect the stock to remain in a bullish orbit.
A high or above contract should be ideally traded under these circumstances to gain a reasonable return on investment, with a minimum risk. The contract can be bought from a binary broker when the stock of Citigroup trades below $57.50 in the equity market. To improve the probability of success in the suggested trade, a trader should pick a date around February 15th for expiry.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
