Tuesday, 4 March 2008

Another Analyst Sees Reality On Citi

More than 6 months ago I was talking about the impending turn in the US earnings cycle. That has since come to pass with 3Q07 earnings turning negative and 4Q07 falling deeper into the red. However, as pointed out here numerous times in recent months, analysts still have their heads in the clouds when it comes to earnings forecasts for 2008.

Today is a good example of an analyst coming around to reality. Last week Meredith Whitney continued her assault on Citi Group by slashing her 2008 earnings forecasts by 70%. Merrill Lynch analyst Guy Moszkowski has upped the ante slashing his 2008 earnings forecasts for Citi by 88% to just $0.24 a share. From marketwatch.com:

Merrill Lynch cuts Citigroup earnings estimates

Merrill Lynch analyst Guy Moszkowski took a knife to Citigroup (C) earnings estimates, forecasting the bank will earn 24 cents for the year and lose $1.66 a share during the first quarter, compared to a previous forecast for $2.74 per share in annual earnings and 55 cents a share in first-quarter earnings. Citigroup may report a $15 billion hit on its subprime/CDO exposure and another $3 billion hit from commercial real estate, leverage lending and consumer lending provisions. But he kept Citi's rating at neutral, saying it trades near proforma book value adjusted for the expected loss this quarter and recent capital raising.

Earnings revisions on Financial companies in particular have a long way to go. My bet is once they see how bad 1Q08 earnings are for many financial companies, downgrades will begin in earnest.