Bank of America (BAC) releases its 1st quarter 2013 earnings on April 17th at 8:30 am Eastern. Below I have provided an earnings analysis as well as some fundamental highlights.
Bank of America has a market cap of $132 billion and currently trades for $12.25 per share. Shares are up 5% YTD and trade 83% above their 52 week high of $6.69. Analysts have a mean price target of $12.40 and a median price target of $12.50 on the shares. 28 analyst have a mean EPS estimate of $0.23 for the first quarter on estimated revenues of $23.39 billion. Bank of America has beat estimated earnings in 3 of the last 4 quarters per Yahoo Finance.
- P/B of 0.6 and P/S of 1.6 are below the industry averages 1.0 and 2.2 respectfully.
- Stronger balance sheet: At the end of 2012 BAC had built up $135 billion of tangible equity.
- BAC stands to benefit from rebounding home prices.
- Technology innovations and online banking have helped BAC become more efficient.
- Large moat: BAC is one of the largest banks in the world with banks in all 50 states.
- Recently BAC authorized the repurchase of $5 billion of its common equity after passing the latest Federal Reserves capital test.
- P/E of 48.5 and D/E of 1.3 are both above the industry averages 14.2 and 1.2 respectfully.
- Operating margin of 3.7% and ROE of 1.3 are both below the industry averages 33.1% and 5.7.
- Large losses have stacked up from its past acquisition of Countrywide and Merrill Lynch with some still pending.
- Focus on cost cutting has been successful but doubt still exists over whether or not management can be as successful generating profits.
- A lot of future profits are priced in. BAC is up 83% over its 52 week low on a record high market. A correction, if it were to occur, would surely bring BAC's stock down.
- Low demand for loans coupled with low interest rates have squeezed margins.
- Failure to gain approval from the Fed to increase the dividend payout.
BAC shares have rebounded over the past year because of the rising market and its focus on strengthening its balance sheet. Going forward, investors are looking for profits, dividends and clarity over its mortgage related liabilities. This earnings release is the first one in the last year that BAC is expected to earn more than $0.07 per share. Investors looking to pick up shares should keep an eye on the interest margins and loan balances as this is the next obstacle management will need to overcome before shares go any further.