Zacks Analyst Blog Highlights: Citigroup, JPMorgan Chase, U.S. Bancorp, Cognizant Technology Solutions, and Infosys Technologies

News provided by

Feb 08, 2011, 09:30 ET

CHICAGO, Feb. 8, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: Citigroup Inc. (NYSE: C), JPMorgan Chase & Co. (NYSE: JPM), U.S. Bancorp (NYSE: USB), Cognizant Technology Solutions Corporation (Nasdaq: CTSH) and Infosys Technologies Ltd. (Nasdaq: INFY).

(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=4579

Here are highlights from Monday's Analyst Blog:

Citi Downgraded to Neutral

We have downgraded our recommendation on Citigroup Inc. (NYSE: C) to Neutral from Outperform, following its fourth quarter earnings release. The downgrade follows our evaluation of the company fundamentals.

Fourth Quarter and Full-Year 2010 Highlights

Citigroup's fourth quarter 2010 earnings came in at 4 cents per share. Earnings fell short of the Zacks Consensus Estimate by 4 cents as the company reported a drop in revenues. Full-year 2010 earnings of 35 cents per share also missed the Zacks Consensus Estimate of 39 cents.

The lower-than-expected results at Citi were primarily due to a drop in both interest and non-interest revenues. The decline stemmed from lower Securities and Banking revenues and lesser gains on sale of available for sale securities.

The revenue figure includes a negative Credit Value Adjustment of $1.1 billion that resulted from tightened spreads. Additionally, there was also an escalation in expenses. However, the decrease in loan loss provisions, which was pretty much expected, was the bright spot.

Citi reported net income of $1.3 billion in the fourth quarter compared with a net loss of $7.6 billion in the prior-year quarter. For full-year 2010, net income came in at $10.6 billion, compared with a net loss of $1.6 billion in 2009.

Downgraded to Neutral

Citi's soft revenue momentum and expectation for slightly higher expenses in 2011 led to this downward revision. While restructuring initiatives are encouraging, the shrinking of its business through assets sale, the CARD Act and the financial reform law continue to challenge revenue. We believe that solid earnings at Citigroup would remain elusive until its revenues experience a decent growth.

Though the repayment of TARP funds through the common stock offering has freed Citi from significant government interventions and pay restrictions, it has also resulted in significant earnings dilution. Additionally, management is aiming for a Tier 1 common ratio of 8% to 9% and currently expects to exceed these levels in 2012. A return of capital to shareholders is not expected until 2012.

Nevertheless, the company's core business, Citicorp, remains attractive with its wide global footprint. The winding down of Citi Holdings is also progressing well and its assets stood at less than 20% of its balance sheet at the end of 2010. Additionally, an improvement in Citi's credit quality is expected in 2011 and this is encouraging.

Competitor

Unlike Citi, JPMorgan Chase & Co. (NYSE: JPM) reported fourth quarter earnings of $1.12 per share, substantially ahead of the Zacks Consensus Estimate of $1.00 on higher non-interest revenue and a slowdown in provision for credit losses. On the other hand, U.S. Bancorp's (NYSE: USB) results were just in line with expectations of 46 cents per share for the fourth quarter as an increase in revenue and improvement in credit metrics were offset by an escalation in expenses.

Cognizant Beats by a Penny

Leading information technology services provider Cognizant Technology Solutions Corporation (Nasdaq: CTSH) reported revenues of $1.31 billion in the fourth quarter of 2010, up 45.2% year over year and up 7.7% sequentially, exceeding the Zacks Consensus Estimate of $1.278 billion and management's expectation of at least $1.27 million.

Net income came in at $206.2 million or 66 cents per diluted share compared to a net income of $144.0 million or 47 cents per share in the fourth quarter of 2009. This easily beat the Zacks Consensus Estimate by a penny. Operating margin came in at 19.8%.

Excluding stock-based compensation expenses of $14.9 million, Cognizant posted an operating margin of 19.8%, within management's targeted range of 19%−20%.

For full 2010, Cognizant reported revenues of $4.59 billion, up 40.1% year over year. Net income came in at $733.5 million or $2.37 per diluted share compared to a net income of $535.0 million, or $1.78 per diluted share in 2009.

Going forward, management expects revenues of at least $1.36 billion in the first quarter of 2011. EPS is projected at 63 cents. Excluding stock-based compensation expenses, EPS is forecasted at 67 cents.

Management stated that business rebounded quickly in 2010 and clients are increasingly turning to Cognizant to outsource a broader range of services. Hence, Cognizant expects a stronger 2011.

Cognizant now expects revenues of at least $5.79 billion in 2011, up 26% year over year. EPS is likely to be at least $2.68. Excluding 17 cents of estimated stock-based compensation expenses, EPS is forecasted at $2.85.

Cognizant earlier stressed that clients are not just seeking cost efficiencies, but are also stepping up investments in their business platforms and new capabilities to drive growth and innovation. The company competes with Infosys Technologies Ltd. (Nasdaq: INFY) in this space.

Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5514.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5516

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=4580.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.