Citigroup Stock Forecast: Cloudy With a Chance of Windfalls

Citigroup (NYSE:C) is a financial giant you can bank on, so to speak, but the company will face challenges in 2024. The Federal Reserve’s interest-rate policy will undoubtedly have a major impact on Citigroup’s top and bottom lines. Yet, there’s data to support a small, cautious position in Citigroup stock this year.

It seems like yesterday that the financial sector was reeling as several regional banks failed or were absorbed by bigger banks. That crisis came and went more than a year ago, but investors may still be reluctant to invest in Citigroup today.

That’s understandable, and the future outlook for Citigroup is still somewhat cloudy. Overall, though, Citigroup can survive and even thrive if the company’s restructuring efforts pan out.

Citigroup: Getting Better by Getting Smaller

You may have heard about Big Tech layoffs during the past several years. This phenomenon isn’t limited to technology firms, however. Citigroup is implementing its own restructuring, which includes large-scale workforce reductions.

The bad news for Citigroup is that laying workers off isn’t an inexpensive process. In order to cut costs, Citigroup has let go of 7,000 employees.

However, according to Reuters, Citigroup incurred $483 million worth of charges during this year’s first quarter “related to severance and a payment into a Federal Deposit Insurance Corp fund.”

$483 million is a deep haircut for Citigroup to take, but CEO Jane Fraser expects the 7,000 layoffs to result in $1.5 billion of cost savings to Citigroup. Fraser further anticipates that, in the medium term, additional job cuts could save Citigroup as much as $2.5 billion per year.

There’s no guarantee that Citigroup will actually save that much money from its layoffs. By 2026, the company plans to reduce its staff by 20,000 workers. Only time will tell how this may impact Citigroup’s top and bottom lines.

An Uncertain Future, but Certainly Good Data

Along with the impact of expected layoffs, there are other unknowns that will affect Citigroup. For one thing, it’s impossible to predict the future path of interest rates, as set by the Federal Reserve.

Moreover, there’s the impact of inflation. Thus, Fraser recently observed consumers being “more cautious in the U.S. and more discerning in their spending patterns.”

While there unknowns to consider, at least we know how Citigroup fared in 2024’s first quarter. The company generated revenue of $21.1 billion, surpassing the analysts’ consensus estimate of $20.46 billion.

Citigroup reported earnings of $1.58 per share, easily beating Wall Street’s call for $1.18 per share.

Ian Lapey, portfolio manager at Gabelli Funds, assessed that Citigroup’s quarterly results “were healthy and demonstrated that the company continues to make progress on its transformation.” I concur, though I’m still cautious as Citigroup’s transformation will take a while.

Citigroup Stock: Embrace Uncertainty, but Limit Your Risk

Successful stock-market investing involves accepting and even embracing uncertainty about future outcomes. Certainly, there’s no assurance that Citigroup will successfully deal with interest-rate policy, job cuts and consumers’ spending patterns.

Citigroup’s first-quarter data indicates that the company is on the right track. So, while a financial windfall isn’t guaranteed for Citigroup and its investors, you can reduce your risk by just taking a small-sized share position in Citigroup stock.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.