Can a New CFO Offer Barclays a Boost?

With shares of Barclays (NYSE:BCS) trading around $17, is Barclays an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Barclays is a global financial services provider engaged in retail banking, credit cards, wholesale banking, investment banking, wealth management, and investment management services. The company operates in eight segments: U.K. Retail and Business Banking, Europe Retail and Business Banking, Africa Retail and Business Banking, Barclaycard, Barclays Investment Bank, Barclays Corporate Banking, Wealth and Investment Management, and Head Office and Other Operations. Banking and capital markets services are just about a requirement for most consumers and companies around the world.

Barclays Chief Financial Officer Chris Lucas will be leaving the company sooner than had been expected due to health concerns. Lucas was set to leave the position in February, but it was announced this morning that he will step down next week and be replaced by Tushar Morzaria on October 15th. Barclays has also been working to increase its capital, looking to raise $9 billion from investors to comply with new British regulations.

T = Technicals on the Stock Chart are Mixed

Barclays stock is trading near-critical price levels that extend back several years. The stock has been consolidating and seems poised to continue this path. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Barclays is trading slightly below its key averages which signal neutral to bullish price action in the near-term.

BCS

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Barclays options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Barclays Options

27.81%

6%

5%

What does this mean? This means that investors or traders are buying a very small amount of call and put options contracts as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

September Options

Steep

Average

October Options

Steep

Average

As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a very small amount of call and put option contracts and are leaning neutral to bearish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. The last four quarterly earnings announcement reactions help gauge investor sentiment on Barclays’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Barclays look like and more importantly, how did the markets like these numbers?

2013 Q1

2013 Q4

2012 Q3

2012 Q2

Earnings Growth (Y-O-Y)

N/A

-50.10%

N/A

-62.60%

Revenue Growth (Y-O-Y)

N/A

N/A

N/A

N/A

Earnings Reaction

-1.31%

9.13%

-0.74%

8.98%

Barclays has seen mixed earnings over the last four quarters. From these numbers, the markets have had mixed feelings about Barclays’s recent earnings announcements.

P = Weak Relative Performance Versus Peers and Sector

How has Barclays stock done relative to its peers, Deutsche Bank (NYSE:DB), HSBC (NYSE:HBC), UBS (NYSE:UBS), and sector?

Barclays

Deutsche Bank

HSBC

UBS

Sector

Year-to-Date Return

2.54%

1.24%

5.37%

31.70%

7.94%

Barclays has been a poor relative performer, year-to-date.

Conclusion

Barclays is a financial services company that strives to support consumers and companies around the world. The company has announced that the current Chris Lucas, the current CFO, will step down earlier than expected and Tushar Morzaria will take his place. The stock has been trading sideways this year as it digests gains from a recent run. Over the last four quarters, investors in the company have had mixed feelings as reported earnings have been up and down. Relative to its peers and sector, Barclays has been a weak year-to-date performer. WAIT AND SEE what Barclays does this coming quarter.

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