The market had a nice start for the earnings season last week. Alcoa (AA) kick started the earnings season and reported a stronger than forecast result. Wells Fargo (WFC) was the first major financial institution to report last week. WFC's fourth-quarter profit rose 24% and revenue exceeded expectations. However, the bank continued to suffer from low interest rates while the mortgage boom showed signs of fading as reported by Dow Jones Newswires. The following report will present six major financial stocks due for reporting for the week of January 14-18, including three with upward EPS estimate trends and three with downward EPS estimate trends.
Three Major Financial Stocks with Upward EPS Estimate Trends
Company Name (Ticker) | Period | Time | EPS Estimate |
Goldman Sachs Group, Inc. (GS) | Q4, 2012 | 7:00AM EST January 16, 2013 | $3.70 |
M&T Bank Corporation (MTB) | Q4, 2012 | 8:10AM EST January 16, 2013 | $2.18 |
BlackRock, Inc. (BLK) | Q4, 2012 | 10:15 AM EST January 17, 2013 | $3.70 |
Source: Earnings Whispers and Yahoo Finance
The EPS estimate for the current quarter for GS had been increased to $3.70 from $3.20 (30 days ago) and $3.15 (90 days ago). The full EPS trends are seen below.
(click to enlarge)
Source: Yahoo Finance
MTB's current quarter EPS estimate had been increased to $2.18 from $2.16 (30 days ago) and $1.89 (90 days ago). The full EPS trends are seen below.
(click to enlarge)
Source: Yahoo Finance
BLK's current quarter EPS estimate, ending in December 12, 2012, had been increased to $3.70 from $3.67 (30 days ago) and $3.64 (90 days ago). The full EPS trends are seen below.
(click to enlarge)
Source: Yahoo Finance
Three Major Financial Stocks with Downward EPS Estimate Trends
Company Name (Ticker) | Period | Time | EPS Estimate |
Bank of America Corp. (BAC) | Q4, 2012 | 1:00 AM EST January 17, 2013 | $0.02 |
Citigroup, Inc. (C) | Q4, 2012 | 8:00 AM EST January 17, 2013 | $0.96 |
Morgan Stanley (MS) | Q4, 2012 | 8:00 AM EST January 18, 2013 | $0.28 |
Source: Earnings Whispers and Yahoo Finance
BAC's current quarter EPS estimate had been lowered to $0.02 from $0.20 (30 days ago) and $0.19 (90 days ago). The full EPS trends are seen below.
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The current quarter estimate for C had been lowered to $0.96 from $1.04 (30 days ago) and $1.00 (90 days ago). The full EPS trends can be reviewed below.
(click to enlarge)
MS's EPS estimate for the current quarter was lowed to $0.28 from $0.33 (30 days ago) and $0.35 (90 days ago). The full EPS trends can be seen below.
(click to enlarge)
Source: Yahoo Finance
Investors need to be aware that sell-side analysts' long-term earnings growth forecasts are systemically overly optimistic around equity offerings and that analysts employed by the lead managers of the offerings make the most optimistic growth forecasts. Wall Street analysts also tend to be too optimistic about the earnings prospects of companies they follow. Furthermore, analysts tend to be overly optimistic following the holiday season as said by John Butters, senior earnings analyst at Factset in an article written by Nin-Hai Tseng from Fortune,
In looking at earnings estimates over the past 15 years, analysts on average have overestimated earnings per share by about 10% between the start and end of the year. Admittedly, Butters says, unprecedented events happened during some of those years, such as the 2001 terrorist attacks and the unfolding U.S. housing crisis in 2008 and 2009. Even if that factored out, analysts still overestimated earnings.
For long-term investors, instead of betting on earnings release, it may be a safer alternative to establish long-term positions should the company miss the analysts' estimates but show the improving fundamentals.
Note: All prices are quoted from the closing of January 11, 2013. Investors and traders are recommended to do their own due diligence and research before making any trading/investing decisions.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
