Zacks Earnings Preview: Q4 Earnings: Banks In Focus
CHICAGO, Jan. 14, 2013
CHICAGO, Jan. 14, 2013 /PRNewswire/ --Zacks.com releases the list of
companies likely to issue earnings surprises. This week's list includes Bank
of America (BAC), Wells Fargo (WFC), JPMorgan (JPM), Citigroup (C) and US
To see more earnings analysis, visit http://at.zacks.com/?id=3207.
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Looking Ahead to Q4 Earnings
The fourth quarter reporting season is underway, and we have results from 27
companies in the S&P 500 already (as of Friday, November 11th). The pace of
reporting accelerates this week, though we don't get into the heart of the
earnings season till the week after.
We will get fourth quarter earnings results from 69 companies, including 37
from the S&P 500. The earnings reports thus far have been relatively improved,
but after more than a tenth of the earnings reports out by the end of the
week, we will have a better sample size to evaluate how this earnings season
The performance of the 27 companies that have already reported are better in
all respects compared to what these same companies did in the third quarter.
The growth rate is higher, more companies are beating, and the median surprise
is higher -- both for earnings and revenues.
But with 95% of the reports still to come, the more important story on the
earnings front pertains to expectations from the coming reports. And there has
been no letup in the downward adjustments to those expectations. Last week's
foreclosure related banking settlement caused further negative revisions to
estimates to a number of banks, particularly Bank of America (BAC). The Zacks
Consensus estimate for Bank of America fell from 19 cents to 2 cents last
week, a roughly $2 billion swing in earnings.
This week's earnings reports are heavily weighted towards Finance, with all
the major banks coming out with fourth quarter results. We got solid earnings
and revenue beats from Wells Fargo (WFC) due to its strong mortgage franchise,
but the bank's net interest margin (NIM) remained under pressure.
This means that other banks with smaller mortgage businesses will be even more
at the mercy of the unfavorable NIM backdrop. We'll know more this week, as
Bank of America,JPMorgan (JPM), Citigroup (C) and many of the other major
regional banks like US Bancorp (USB) report results, but expectations for
Finance sector earnings have come down.
Total fourth quarter earnings for the Finance sector, which a few days back
were expected to be up +9.7%, are now expected to be up only +2%. As a result,
total earnings for the 473 S&P 500 companies that have still to report results
are now expected to be down -1.2% from the same period last year.
About the Zacks Rank
Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are
the most powerful force impacting stock prices." Since inception in 1988, #1
Rank stocks have generated an average annual return of +28%. During the
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tumbled -37.6%. Also note that the Zacks Rank system has just as many Strong
Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since
1988, Zacks Rank #5 stocks have significantly underperformed the S&P 500 (+3%
versus +10%). Thus, the Zacks Rank system allows investors to truly manage
portfolio trading effectively.
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