Although Citigroup (NYSE:C) CEO Vikram Pandit was happy with the first quarter results, which surprised some by doubling profits and increasing revenue, Pandit was quit to add caution on any type of positive guidance going forward, implying there is a long road ahead for Citigroup, and they’re still going to experience a lot of ups and downs on the journey.
Pandit said about the quarter, “We are proud of our first-quarter results but remain cautious about the environment, given the uncertain economic recovery and high unemployment in the U.S. Realistically, we do not expect our performance to follow an invariable trend-line upward.”
Profits for the quarter came in at $4.43 billion, or 15 cents a share. Up from a $1.59 million profit from the year before. Revenue increased to $25.42 billion, a boost of 3.7 percent.
Most analysts and investors during this quarterly earnings season aren’t that interested in the current earnings reports, as almost all of them should be better than the same period last year when the majority of companies were depressed in revenue and earnings. So there is little importance in the numbers, which are assured for most companies to be better.
While the major media outlets will report this as a ongoing part of the alleged recovery we’re in, the majority of analysts and investors know the difference, and are rather looking to guidance from the companies reporting as the key metric, rather than the temporary numbers reported.
In the case of Citigroup, the guidance by Pandit isn’t good news, as cited above, as he outright says he remains cautious on the macro-economic side, even calling the so-called economic recovery “uncertain.”
For most of the businesses reporting in this quarter, if they give guidance contrary to Pandit, it should be considered suspicious, as there is no way a company in the existing global economic environment can give upwards guidance in any predictable manner.
Obviously there may be a few exceptions, but in general, how Pandit described guidance above is what most honest CEOs will say as well.
What all of us need to look for is guidance from CEOs or those presenting the reports in a committed way. None of this smoke and mirrors. If guidance isn’t clear, to me it’s another way of saying there is a long way to go for the company and economy, and unfortunately, not enough business leaders will probably have the guts to admit it.
I’m glad Pandit did. As for Citigroup, regardless of the push to drive the stock higher, it’s very clear they are in for a long struggle according to the guidance offered by Pandit.
