In two business days (Oct. 13), Bank of America Corp. (BAC, Financial) will release its financial results for the third quarter before the New York Stock Exchange opens.
For the quarter that closed Sept. 30, the average analyst has projected an EPS of 46 cents. This figure is 5 cents higher than the EPS of one year ago and is a mean of 25 estimates of analysts who were surveyed.
Source: Yahoo Finance
As you can see in the chart above, the estimates on Bank of America’s third-quarter earnings range between a low of 43 cents per share and a high of 48 cents per share. Estimates on earnings are produced by the analysts on revenue that for the quarter in question are expected to come in at an average of $21.94 billion.
Source: Yahoo Finance
As is shown in the picture above, the average figure of third-quarter revenue is a mean of 14 estimates that range between a low of $21.44 billion and a high of $22.6 billion.
The average analyst expects a nearly flat third quarter of fiscal 2017 revenue compared to one year ago. The year-over-year increase analysts forecast in quarterly revenue is only 0.40% on average.
Speaking of the profitability of Bank of America’s business, consensus evidently expects an improvement from one year ago since the U.S. global banking and financial services company is set as a buy with a recommendation rating of 2.1 out of 5.
Investors in Bank of America are, of course, interested in the bank’s profitability since an improvement in the most important metric may determine a further rise in the quarterly dividend Bank of America pays its shareholders. This year Bank of America has already increased its quarterly dividend 60% from a previous 7.5 cents to a current 12 cents for an annual distribution of 48 cents that leads to a dividend yield of 1.83%.
According to the most recent share price, the dividend yield of Bank of America is just a whisper away from the Standard & Poor's 500 current dividend yield of 1.89%.
The most important metrics on Bank of America’s profitability tell that the net profit margin (ttm) is about 18.5% versus an industry average of 18.37% and versus a sector average of 83.35%; the loan-assets ratio is 40.18% (as you can see in the chart below); and the ROA (Return on Assets) is 0.80% versus an industry average of 4.42% and a sector average of 8.07%.
Regarding the loan-assets ratio, giving loans – the fundamental activity of a bank and the first source of income – has for Bank of America more weight than for its peers such as Citigroup (C, Financial) and JPMorgan Chase (JPM, Financial). From this point of view, Bank of America is more like Wells Fargo & Co. (WFC, Financial).
Bank of America will also provide its shareholders with an update on its balance sheet’s figures that as of the most recent quarter were as follows:
- Cash on hand and securities: $721.434 billion.
- Long-term investments: $1.604 trillion or 71.2% of Bank of America’s total assets which were valued $2.255 trillion as of June 30.
- Total liabilities: $1.984 trillion.
- Total stockholder equity: $270.987 billion.
Bank of America is trading at $25.93 with a market capitalization of $273.58 billion, a price-book (P/B) ratio of 1.04, a price-earnings (P/E) ratio of 15.43 and a price-sales (P/S) ratio of 3.27.
Bank of America has approximately 10.55 billion shares outstanding, of which 99.62% is float. The percentage of Bank of America’s shares outstanding held by insiders is 0.13% while the portion held by institutions is 63.52%.
BlackRock Inc. (BLK, Financial) is the top institutional holder with 6.78% as of June 29 followed by The Vanguard Group Inc. with 6.72%, State Street Corp. (STT, Financial) with 4.50% and FMR LLC with 3.38%.
Bank of America has an average target price of $27.50 per share. Analysts’ estimates on Bank of America’s target price range between a low of $20 per share and a high of $32 per share.
The forward P/E ratio is 12.08 that multiplied by a weighted (quarters) average EPS for full fiscal years 2017 and 2018 of $2.06 yields to a value of $24.92.
According to Peter Lynch, Bank of America was undervalued by the stock market with reference to the earning line updated with results of the second quarter:
The third quarter of fiscal 2017 results will also tell if Bank of America is still undervalued by the stock market according to the Peter Lynch Chart.
Disclosure: I have no positions in any stock mentioned in this article.
