Citizens Financial Group, Inc. (CFG - Get Rating) in Providence, R.I., operates as the bank holding company for Citizens Bank, National Association (CBNA) in the United States. It recently raised CBNA’s prime lending rate to 4% from 3.5% and is well-positioned to benefit from the market’s expectation of further interest rate rises. Also, the company’s board of directors declared a second-quarter 2022 common stock dividend of $0.39 per share, which was paid on May 17, 2022, to shareholders of record at the close of business on May 3, 2022.

CFG also announced the pricing of $400 million of subordinated notes and $650 million of CBNA senior notes and intends to use the net proceeds for general corporate purposes.

The stock has declined 17.6% in price over the past three months to close yesterday’s trading session at $40.04. In addition, it is currently trading 29.8% below its 52-week high of $57, which it hit on Jan. 18, 2022.

Here is what could influence CFG’s performance in the upcoming months:

Discounted Valuation

In terms of forward non-GAAP PEG, CFG’s 0.51x is 56% lower than the 1.16x industry average. Its0.83x forward P/B is 26.8% lower than the 1.14x industry average. And the stock’s 8.73x forward non-GAAP P/E and 2.50x P/S are lower than the 10.44x and 2.96x respective industry averages.

Disappointing Financials

CLH’s revenue increased 0.8% year-over-year to $1.65 billion in the first quarter, which ended March 31, 2022. However, its underlying net income declined 24% year-over-year to $476 million. And its $1.07 underlying EPS was down 24.1% year-over-year.

Low Profitability

In terms of trailing-12-month ROCE, CFG’s 9.89% is 22% lower than the 12.66% industry average. And its trailing-12-month ROTA of 1.11% is 11.9% lower than the1.26%  industry average.

Unfavorable Analyst Estimates

Analysts expect CFG’s EPS to decrease 41% in the current quarter and 15.9% in the current year. In addition, its EPS is expected to decline at 2.8% per annum over the next five years.

POWR Ratings Do not Indicate Enough Upside

CFG has an overall C rating, which equates to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. CFG has a C grade for Stability, which is consistent with its 1.41 beta.

The stock has a D grade for Quality, which is in sync with its lower-than-industry profitability ratios. In addition, CFG has a D grade for Sentiment. This is justified because analysts expect its EPS to decline in the near term.

CFG is ranked #27 out of 34 stocks in the Mid-Atlantic Regional Banks group. Click here to access CFG’s ratings for Value and Momentum.

Bottom Line

CFG is currently trading below its 50-day and 200-day moving averages of $41.71 and $46.87, respectively, indicating a downtrend. Furthermore, its share price could keep retreating in the near term due to concerns over capital markets and mortgage revenue. So, we think it could be wise to wait for a better entry point in the stock.

How Does Citizens Financial (CFG) Stack Up Against its Peers?

While CFG has an overall POWR Rating of C, one might want to consider investing in the following Mid-Atlantic Regional Banks stocks with an A (Strong Buy) or B (Buy) rating: First United Corporation (FUNC - Get Rating), C&F Financial Corporation (CFFI - Get Rating), and Capital Bancorp, Inc. (CBNK - Get Rating).

CFG shares were trading at $40.35 per share on Thursday morning, up $0.31 (+0.77%). Year-to-date, CFG has declined -13.10%, versus a -13.71% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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