We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Previewing Bank of America Amid a Wave of Bank Earnings
Read MoreHide Full Article
Bank of America (BAC - Free Report) is one of the largest financial institutions in the world with total assets of $3 trillion under management. Bank of America has four primary business segments it reports through. Consumer Banking (37% of total assets), Global Wealth and Investment Management (12%), Global Banking (20%), Global Markets (27%), and a fifth smaller unit All Other (5%).
Earnings Expectations
Bank of America currently has a Zacks Rank #4 (Sell), indicating downward trending earnings revisions. Analysts have unanimously downgraded their earnings expectations for BAC. The current quarter has been revised lower by -3.7%. Current quarter earnings are expected to come in at $0.79 per share, a -1.25% decline YoY.
Image Source: Zacks Investment Research
Sales expectations are still quite robust though. Current quarter sales are expected to grow 8% YoY to $25 billion. This would be a continuation of the strong sales growth BAC has experienced over the last few years. Higher interest rates and the net interest income the BAC collects because of it have played an important role in growth.
Image Source: Zacks Investment Research
Warren Buffett
Bank of America remains one of Warren Buffett’s largest holdings. It is the second largest position, at $33 billion and 10% of the total portfolio. This is an especially encouraging data point considering Buffett just sold off the last of his US Bancorp (USB - Free Report) shares. While USB is the fifth largest bank in the US it clearly doesn’t make the cut for Buffett’s Berkshire Hathaway. Buffett started buying US Bancorp shares in 2004 and the position was as big as $8 billion at one point. Having taken it down to zero, Buffett evidently sees something he doesn’t like.
US Bancorp reports earnings Wednesday, April 17 before the market opens.
Banking Industry
The banking sector experienced some considerable volatility following the failure of Silicon Valley Bank. Many commentators feared there may be further contagion through the banking sector, and that even the large banks may experience bank runs. Fortunately, that has not played out - yet.
There were large draws in bank deposits in March, however not all banks experienced it equally. While the were clear net outflows of deposits from smaller banks, the big banks actually saw net inflows.
Nonetheless, Bank of America shares have still not recovered from the hit they took following the news. Investors seem like they may still be reluctant to get back into even the largest banking companies.
Image Source: Zacks Investment Research
Banking giant JP Morgan (JPM - Free Report) reported earnings Friday, April 14 and results surprised to the upside. Earnings of $4.10 per share exceeded expectations of $3.37 per share, and sales of $38.4 billion handily beat expectations of $35.7 billion. Investors were clearly happy with the results as the stock is up 8% since reporting.
Valuation
Bank of America is trading at a one-year forward earnings multiple of 9x, which is in line with the industry average, and below its five-year median of 11x. Additionally, BAC has a dividend yield of 3%, which it has raised by an average of 11% annually over the last five years.
Image Source: Zacks Investment Research
Bottom Line
While Bank of America has a low Zacks Rank due to its declining earnings revisions, it still has some bullish catalysts. With the fear that the recent banking crisis brought, big banks like BAC and JPM have acted as a haven. The security of big banks has become an important consideration for banking customers.
Additionally, at under 10x earnings BAC has a reasonable valuation. Also, opening of new financial centers, enhancement in digital capabilities and prudent cost management efforts are expected to keep aiding its top and bottom line.
Risks are lurking in the Banking sector though, so tread with caution.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Previewing Bank of America Amid a Wave of Bank Earnings
Bank of America (BAC - Free Report) is one of the largest financial institutions in the world with total assets of $3 trillion under management. Bank of America has four primary business segments it reports through. Consumer Banking (37% of total assets), Global Wealth and Investment Management (12%), Global Banking (20%), Global Markets (27%), and a fifth smaller unit All Other (5%).
Earnings Expectations
Bank of America currently has a Zacks Rank #4 (Sell), indicating downward trending earnings revisions. Analysts have unanimously downgraded their earnings expectations for BAC. The current quarter has been revised lower by -3.7%. Current quarter earnings are expected to come in at $0.79 per share, a -1.25% decline YoY.
Image Source: Zacks Investment Research
Sales expectations are still quite robust though. Current quarter sales are expected to grow 8% YoY to $25 billion. This would be a continuation of the strong sales growth BAC has experienced over the last few years. Higher interest rates and the net interest income the BAC collects because of it have played an important role in growth.
Image Source: Zacks Investment Research
Warren Buffett
Bank of America remains one of Warren Buffett’s largest holdings. It is the second largest position, at $33 billion and 10% of the total portfolio. This is an especially encouraging data point considering Buffett just sold off the last of his US Bancorp (USB - Free Report) shares. While USB is the fifth largest bank in the US it clearly doesn’t make the cut for Buffett’s Berkshire Hathaway. Buffett started buying US Bancorp shares in 2004 and the position was as big as $8 billion at one point. Having taken it down to zero, Buffett evidently sees something he doesn’t like.
US Bancorp reports earnings Wednesday, April 17 before the market opens.
Banking Industry
The banking sector experienced some considerable volatility following the failure of Silicon Valley Bank. Many commentators feared there may be further contagion through the banking sector, and that even the large banks may experience bank runs. Fortunately, that has not played out - yet.
There were large draws in bank deposits in March, however not all banks experienced it equally. While the were clear net outflows of deposits from smaller banks, the big banks actually saw net inflows.
Nonetheless, Bank of America shares have still not recovered from the hit they took following the news. Investors seem like they may still be reluctant to get back into even the largest banking companies.
Image Source: Zacks Investment Research
Banking giant JP Morgan (JPM - Free Report) reported earnings Friday, April 14 and results surprised to the upside. Earnings of $4.10 per share exceeded expectations of $3.37 per share, and sales of $38.4 billion handily beat expectations of $35.7 billion. Investors were clearly happy with the results as the stock is up 8% since reporting.
Valuation
Bank of America is trading at a one-year forward earnings multiple of 9x, which is in line with the industry average, and below its five-year median of 11x. Additionally, BAC has a dividend yield of 3%, which it has raised by an average of 11% annually over the last five years.
Image Source: Zacks Investment Research
Bottom Line
While Bank of America has a low Zacks Rank due to its declining earnings revisions, it still has some bullish catalysts. With the fear that the recent banking crisis brought, big banks like BAC and JPM have acted as a haven. The security of big banks has become an important consideration for banking customers.
Additionally, at under 10x earnings BAC has a reasonable valuation. Also, opening of new financial centers, enhancement in digital capabilities and prudent cost management efforts are expected to keep aiding its top and bottom line.
Risks are lurking in the Banking sector though, so tread with caution.