Earnings Preview: Wells Fargo

Wells Fargo (WFC) is expected to report Q3 results before the market open on Wednesday, October 21 with a conference call scheduled for 8:30 am ET.

Guidance

Analysts are looking for EPS of 36c on revenue of $21.35B. The consensus range is 4c-50c for EPS, and $20.89B-$22.32B for revenue, according to First Call.

Analyst Views

UBS earlier this month initiated Wells Fargo with a Sell rating. The firm thinks the bank will be hurt by credit trends and it predicts that Wells' fundamentals will not meet expectations in 2010 and 2011. The firm added that Wells Fargo could conduct a dilutive stock issue in the near future. In addition, Meredith Whitney on October 13 predicted that banks' Q3 results would be mixed. The analyst recommended taking profits in the sector, as she expected that financial institutions would be hurt by lower earning assets and rising delinquencies. Large banks' earnings have indeed been mixed so far, Citigroup (C) and Bank of America (BAC) disappointed investors, while JP Morgan (JPM) and BB&T (BBT) reported better than expected results.

On a positive note, J.P. Morgan CEO Jamie Dimon said that he was "seeing some initial signs of consumer credit stability," but added that he was uncertain if the trend would continue. In addition, Goldman Sachs on October 5 upgraded Wells Fargo to Buy from Neutral, citing valuation and what it sees as the bank's improving capital position. Wells Fargo CEO John Stumpf said last month that the bank had used $2.2B out of a total of $10.4B in credits for losses from Wachovia's most problematic commercial and foreign loans. Investors may want to note whether the bank has utilized more of this fund in the month since Stumpf's update. Stumpf added that he expects the amount of Wells Fargo's nonperforming loans to increase.

Comments

[Dr. Roberts:]

This is a real tough one so let me cogitate for just a moment. It is UBS and the ubiquitous media darling Meredith Whitney who, unlike a broken clock, has only been right once, against the analyst at GS. Real tough call sports fans. Bet the frickin' farm on WFC! Those of you that heed my advice can send my cut via Paypal.

Oct 20 12:24 PM

[oceansmike:]

we''ll see in 5 hours and get back to you which way we proceed,gd luck WFC traders and Investers,,still having fun this year,,,,

Oct 21 03:25 AM

[Dr. Roberts:]

When John Stumpf is observed entering his low key limo smiling from ear to ear as he greets "team members" mere days before earnings announcement, one can only draw the conclusion that all is well at Wells. Once John gets Uncle Sam out of Wells Fargo's boxer shorts, look for a resumption of the generous dividend and a target price of....of.....won't say it......let's just say buy all the WFC at 31 as one can.

Oct 21 10:09 AM