Wells Fargo Inspires Hope with 'Surprise' Earnings

Thursday morning, Wells Fargo & Co. (NYSE: WFC) announced that it expects a $3 billion profit from the first quarter. One of the biggest banks in the country, Wells Fargo is the first big winner from this earnings season.

It’s in stark contrast to Alcoa (NYSE: AA), the world’s biggest aluminum producer, which reported lower earnings than expected.

Wells Fargo’s news has spurred a mini rally this morning, and traders are rushing back into financials. But it shouldn’t surprise anyone, really.

It’s a huge clue that there are large profits being made – the world hasn’t ended.

No doubt, there will be firms that are so severely affected by this downturn that they will have no choice but to close their doors or be bought out. But the fact remains that there are companies that are profiting handsomely.

The market is oversold, based off collective fears of a “worst-case scenario.” It’s simply not the case. And fortunately, that means Wells Fargo won’t be the last company to surprise. Its stock is happily up 25% as of this writing.

As earnings numbers roll out next week, watch big movers like CSX Corp. (NYSE: CSX), Intel (Nasdaq: INTC) and Johnson & Johnson (NYSE: JNJ) for a better indicator of our economy’s true strength. These three companies are great barometers of technology, consumer goods and goods transportation.

A few more surprises from companies like these, and it’ll tell you the “light at the end of the tunnel” is real, and not just the train barreling towards us.

Comments

[Dr. Roberts:]

Calling Dr. Roubini, Dr. Krugman, Dr. Roubini.... Dr. Roubini, Dr. Krugman, Dr. Roubini

Apr 10 02:10 AM

[Gedankonomist:]

So, in other words, for every billion in profit Wells Fargo made, it cost the taxpayers 25/3 = 8.33 billion dollars. That's an even better margin than Archer-Daniels-Midland!

Wells Fargo is $25 Billion Richer, Thanks to TARP
tinyurl.com/d2v9v3

Apr 10 03:20 PM

[Rumpole:]

But no one has asked what effect the change to the M2M rules has had on WFC's stated earnings and these numbers. It smells ... and I imagine most of the earnings reports from the other big banks will be better than expected. And that will smell too.

Apr 10 03:50 PM

[Mad Hedge F...:]

You had to see this coming. So there is life after near death! Wells Fargo (WFC) stunned the street with a surprise $3 billion profit in Q1, vastly better than expectations. The shocker was that charge offs from loan losses amounted to only $3.3 billion, a shadow of forecasts that ranged as high as $8 billion. Some analysts suspect that some creative accounting was involved in consolidating the losses from recently acquired Wachovia Bank (WB). Short sellers were seriously squeezed and no doubt are now speaking in voices several octaves higher, pushing the stock up an amazing 40%. The news triggered an all out assault on bank haters, there are still plenty out there, taking JP Morgan up 24% and Bank of America up 42%. A share of Citigroup at $3will now buy you a cup of coffee at Starbucks, but only if you get the cheap stuff. With the Fed raining money down on the sector and the Treasury changing the rule book almost daily to make this work, how else was this going to play out? This puts WFC first in line to repay TARP money and get the Feds out of their hair. It also underlines the argument that I have been making all along that if you put mark to market and asset valuation issues aside (no easy task), the banking business in now the most outrageously profitable in its long history.

Apr 10 04:36 PM