The largest U.S. bank by market capitalization, Wells Fargo (WFC, Financial), is about to announce its first-quarter numbers of fiscal year 2015 on April 14, before the market opens. In fact, it will be one of the premiere banks posting its first-quarter results early this week. Analysts and investors have great expectations from Wells Fargo as it remains a major player in the mortgage lending business in the U.S.
Let’s get into the facts and figures that are being highlighted by analysts across the globe while discussing upon the expected numbers for the first quarter.
Analysts’ take stays mixed
Though analysts are predicting a dip in profitability for the bank during the quarter, they remain optimistic on the earnings of Wells Fargo in the first quarter. The Street analysts are expecting the bank to report earnings of around $0.98 a share on revenue of $21.24 billion. In fact, the continued sluggishness in the mortgage lending line of business could serve as a drag on the results for the quarter. And that’s why analysts have predicted the revenue will drop 2% year-over-year in the first quarter, from $12.62 billion reported a year ago.
The dip in profits is directly linked to the drop in revenue during the quarter for Wells Fargo. The bank has been providing financial services in wholesale banking, mortgage banking, consumer finance, equipment leasing, agricultural finance and commercial finance to clients on a global scale. Many times in the past, the largest bank in the U.S. has been rewarded for the simplicity in its operations and its earnings have topped the Street estimates for the past nine quarters at a row.
It remains to be seen whether the bank is able to retain the trend that it has been portrayed in the past quarters by surpassing the analyst estimates; this time as well. But it might not be an easy task since Wells Fargo has lately been showing inclination towards more complex and riskier business operations such as revamping its investment banking division and expansion of its trading units.
Stock recommendation for investors
It has been reported that the majority of analysts (almost 52% of the analyst community) are rating the stock as “buy,” which compares favorably to the analyst ratings of 10 similar companies that averaged 49% buys.
According to Bloomberg data, 18 out of 39 analysts are recommending a “buy,” while 18 suggest a “hold” and 3 advocate a “sell” on the stock. In fact, Wells Fargo’s past month’s success in clearing the annual stress tests conducted by the Federal Reserve have influenced the analyst community worldwide. In fact, such stress testing has confirmed that Wells Fargo currently has proper capital and risk-management controls in place to survive an economic downturn. The ability to sustain its business operations and to remain profitable in times of economic turmoil is indicative of its rich fundamentals that have left analysts spell-bound.
Last word
All eyes are now waiting for the actual quarter results to be declared from the management’s end on April 14 that would provide further insight into how the bank performed as a whole during the quarter and whether it’s able to sustain the trend of beating the Street’s quarterly expectations. So let’s stay tuned for the real numbers to be out of the bag.
