Friday, 17 July 2015

US earnings catch-up Tuesday-Thursday #1

It has been a busy last couple of days...but time for a quick earnings catch-up.

Blackrock earnings - as is often the case - caught my attention because of the active versus passive data they contained.  From an active perspective note the improvement in the active equity performance and the deterioration in active fixed income performance.  The first sign of a long-awaited improvement?

Citigroup numbers were impressive...even if you ungenerously applied the company-wide underlying 11% return on tangible equity... Citi's US$59+ tangible value per share you would get a static 'fair' value of around US$65/share versus the prevailing US$58+ share price.  Of all the US banks I have looked at this quarter so far Citigroup stands out as the cheapest/best value.

Contrast this to Goldman Sachs where book value was sequentially (qoq) unchanged...

...and being generous an applying the relatively muted (by GS standards) 9.7% RoE for H1 gives a fair value of around US$170.  To justify the company's current US$210+ share price you would need to see sustainably a return to the lower teens RoE...certainly possible but necessarily a partial leap of faith today.

And finally Bank of America where returns on tangible equity romped and statically implied a US$19+ fair value (a little above the current share price).  Pull that analysis back a quarter however and this would fall to US$12+.  The reality is somewhere in the middle.  Buy Bank of America below US$16/share (which I observe also works on the chart).
Much more earnings analysis to come - still a good backlog of companies to appraise. 

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