Citigroup Touches 52-Week High: Should Investors Buy C Stock Now?

Citigroup Inc. C shares touched a new 52-week high of $73.99 during yesterday’s trading session. The stock closed the session a little lower at $72.74.Shares of C have risen 37.3% compared with the industry and the S&P 500 Index’s growth of 39.9% and 26.8%, respectively. Also, its close peers like Wells Fargo & Company WFC and Bank of America Corporation BAC gained 46.1% and 36%, respectively.1-Year Price PerformanceImage Source: Zacks Investment ResearchCitigroup's recent price surge can be attributed to optimism surrounding the release of its upcoming fourth-quarter and full-year 2024 earnings, scheduled on Jan. 15, 2025. The company’s investment banking fees are expected to increase 20-30% in the fourth quarter of 2024, while market revenues are expected to see a high-teen percentage growth, supported by strong performance in equities and higher prime balances, contributing to the overall positive sentiment. The company’s revenues for 2024 are expected to be at the higher end of the $80-$81 billion range.Other Factors Driving C Stock HigherBusiness Restructuring Efforts: The company has been prioritizing strategic initiatives to boost its financial performance and optimize its operations.Since CEO Jane Fraser took the helm in 2021, Citigroup has been undergoing a significant transformation. The company has focused on cost-cutting measures, management restructuring and streamlining operations to improve its profitability.The restructuring process included an organizational restructuring that replaced the reportable segment with five new reportable operating segments. Also, the leaders of each of Citigroup’s five main businesses will report directly to the CEO. The reorganization trimmed management layers. It now has eight layers rather than 13.Additionally, Citigroup is also emphasizing growth in core businesses through streamlining consumer banking operations globally. In sync with this, the company completed the separation of its institutional banking business in Mexico from its consumer, small and middle-market businesses in December 2024. With such optimization of management layers and reduction in functional roles, along with the bank’s consumer banking divesture efforts, the company projects revenues to see a compounded annual growth rate of 4-5% and annualized run rate savings of $2-$2.5 billion by 2026-end.Image Source: Zacks Investment ResearchFed’s Rate Cut to Aid NII: The Federal Reserve lowered the interest rates by 100 basis points since September 2024. The fed fund rates are now in the 4.25-4.5% range. Also, the central bank hinted at two more rate cuts this year.The rate cut is a positive development for Citigroup, which is under increasing funding cost pressures. During the nine months of 2024, NII declined 2% from the same period a year ago. NIM declined to 2.33% in the third quarter of 2024 from 2.41% in the second quarter of 2024 and 2.42% in the first quarter of 2024. For 2024, management expects NII (excluding Markets) to move down slightly on a year-over-year basis.With a decline in interest rates, funding costs will stabilize and decline eventually. This will support Citigroup’s NII and NIM growth.Encouraging Capital Distribution: As of Sept. 30, 2024, Citigroup’s Common Equity Tier 1 ratio and the total capital ratio of 13.71% and 15.21%, respectively, were well above the regulatory requirements.The bank’s focus on maintaining a strong capital position supports its capital distribution activities. In July 2024, the company hiked its quarterly dividend by 6% to 56 cents per share. Further, the company has been consistently paying quarterly cash dividends. The bank hiked dividends twice during the last five years with a dividend payout ratio of 41%.Also, Citigroup has a share repurchase plan. In the third quarter of 2024, it repurchased $1 billion worth of shares. The bank aims to complete the same level of repurchases in the fourth quarter of 2024. Similarly, WFC has increased its dividend four times over the past five years, while BAC has increased it four times over the same time frame.Near-Term Concerns for CitigroupThe company is witnessing a rise in credit losses. During the first nine months of 2024, Citigroup’s net credit losses increased 52% from a year ago. In a recent SEC filing, Citigroup’s subsidiary, Citibank N.A., disclosed a rise in its credit card trust delinquency and net charge-off rates for November 2024 compared with October 2024. Nonetheless, both the metrics remained under their pre-pandemic levels despite the recent uptick. At the Goldman Sachs U.S. Financial Services Conference held on Dec. 10, 2024, Citigroup’s Chief Financial Officer, Mark Mason, stated that the rise in delinquency and charge-off rates is mainly attributable to the delayed losses from customers who borrowed during the COVID period. These losses are now showing up but are still within the company’s expected range. For 2024, net credit losses are anticipated to be 3.5-4% in the company’s branded cards business and at the higher end of 5.75-6.25% in retail services.Analyst Sentiments Bullish for COver the past 60 days, the Zacks Consensus Estimate for earnings per share of $5.87 and $7.20 for 2024 and 2025, respectively, has moved upward.Image Source: Zacks Investment ResearchIs This the Right Time to Buy C Stock?To summarize, despite the solid growth potential Citigroup offers over the long run driven by its transformational efforts and Fed rate cuts, it is not advisable to add this stock to one’s portfolio right now due to rising credit losses, which could affect its near-term performance.Investors should closely monitor Citigroup's ability to navigate these challenges and capitalize on emerging opportunities to assess its long-term viability. We suggest investors wait for a more appropriate entry point. Citigroup currently carries a Zacks Rank of 3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Bank of America Corporation (BAC): Free Stock Analysis Report Wells Fargo & Company (WFC): Free Stock Analysis Report Citigroup Inc. 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