The Dow Spikes as Citigroup Settles for $7 Billion, Beats on Earnings

Citigroup tops earnings projections after agreeing to a major deal with the Department of Justice, while Abbott Labs and Mylan agree to a huge sale.

Jul 14, 2014 at 2:30PM

Stocks have boomed to kick off the new week as the Dow Jones Industrial Average (DJINDICES:^DJI) has gone on a tear since the opening bell sounded. As of 2:15 p.m. EDT, the Dow has jumped 125 points, with all but a handful of its 30 member stocks in the green so far. Today's biggest stock stories have come from outside the Dow Jones, however, after Citigroup (NYSE:C) walloped Wall Street earnings forecasts and Abbott Labs (NYSE:ABT) and generic-drug maker Mylan (NASDAQ:MYL) agreed to a big deal. Let's catch up on what you need to know.

Citi keeps earnings season rolling

Citibank Mosco

Citibank in Moscow, Russia. Source: Wikimedia Commons.

Citigroup topped earnings expectations in its second-quarter results, pushing the bank stock higher by 3% on the day. The company's $1.24 in adjusted per-share net earnings soundly smashed average analyst projections of $1.05, and trading revenue at Citigroup fell less than expected, declining 16% year over year after company leadership had projected a much wider loss.

However, Citigroup's $7 billion settlement with the Department of Justice has dominated the news on this big bank today. The company's agreement with the government will resolve potential lawsuits against the bank regarding the sale of mortgage securities before the 2008 financial crisis. Citi noted that the deal, which includes a cash penalty of $4 billion, cost the company $3.8 billion in pre-tax earnings for the second quarter. That slammed the firm's unadjusted earnings today -- Citi managed net income of only $181 million, a giant drop-off from the quarter a year ago -- but the settlement will allow the bank and its investors to move on from the storm cloud of government investigation.

Elsewhere around the market today, Abbott Labs is making waves around Wall Street, although the health care stock has climbed just 0.8% on the day. Abbott agreed to sell part of its established drug business to generic-drug giant Mylan in a deal worth more than $5 billion. It's an important step forward for Abbott and its investors, as the company's generic-drug business has been a drag on growth lately. In the first quarter, the unit saw sales decline by more than 6% year over year, hit hard by currency exchanges, as Abbott's generics business operates solely outside of the U.S.

Even on operational growth, however, the business saw sales slip by nearly 1% year over year, making it Abbott's second-worst-performing unit for the quarter after nutritionals, which were largely affected by a supplier recall. In the long term, the generics business isn't a growth driver for Abbott or its shareholders, and selling off part of the unit will allow the company to focus on higher-growth areas such as diagnostics and nutrition.

It's also a great deal for Mylan, however. The company plans to combine its existing business with the assets it picked up from Abbott to launch a new company incorporated in the Netherlands. There, Mylan projects it will lower its tax rate from 25% to around 21% in the first full year of operations, with further tax reductions likely to come down the road. Mylan expects the purchase to add nearly $2 billion worth of revenue to the company's portfolio once the deal is closed, helping the company gain more traction outside of the U.S. In all, it's a sound deal for both parties -- and for shareholders of each.

Bank of America + Apple? This device makes it possible.
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its destined to change everything from banking to health care. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here

Dan Carroll has no position in any stocks mentioned. The Motley Fool owns shares of Citigroup. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers