I've been covering Bank of America (NYSE:BAC) since early in 2013, calling it a buy all along the way. Bank of America is arguably the best buy to play the banking recovery post-2008, and its leading its banking peers in both stock performance, and value.
The stock has performed well in the midst of broader market uncertainty this year. In 2014, the bank has returned 8% - in the last 3 months, 17.5% - and, for the last year, the bank has returned an astounding 43% to its shareholders.
Other major banks haven't come close to how Bank of America has fared so far this year. Year to date, names like Wells Fargo (NYSE:WFC) and JP Morgan (NYSE:JPM) have had trouble with returns while Bank of America has flourished.
Analysts remain bullish on the bank due to the fact that estimates have risen significantly more than other banks, as reported by the Wall Street Journal:
Earnings might be the force driving Bank of America's stock higher. A look at per-share earnings estimates of analysts polled by Thomson Reuters since the large U.S. banks reported fourth-quarter earnings last month shows that no big U.S. commercial bank has seen its estimates for this year and next raised as sharply as Bank of America has.
"I always believe stocks follow earnings and earnings revisions," said Jefferies analyst Ken Usdin.
The consensus per-share earnings estimate for Bank of America has risen 1.5% for 2014 and 1.9% for 2015. By contrast, Wells Fargo and J.P. Morgan Chase JPM +0.25%& Co. saw rises of 0.2% for both periods. Analysts have cut their earnings estimates on Citigroup Inc. C +2.26% by 4.9% for 2014 and 2.5% for 2015 since the bank reported earnings. U.S. Bancorp has seen the consensus earnings estimate fall by 0.6% for 2014 and 2015. Only PNC is close, with estimates rising by 1.3% and 1.2% for 2014 and 2015.
EPS and net income growth are expected by analysts across the board well into 2015. The bank will conclude a major cost cutting initiative in 2014, as well.
The underlying fundamentals of the company are incredibly strong, even though there is concern surrounding potential legal costs that the bank could incur as residual damage from the subprime crisis. The bank is currently working through an $8.5 billion settlement that's tied up in the courts.
Respected SA contributors like Bret Jensen, Josh Arnold, and Bram de Haas all share my bullish sentiment on the company. I finally took my bullish sentiment and converted it into a started position a couple weeks ago.
The banks EPS has been growing consistently since 2010, mostly due to efficient cuts made under CEO Brian Moynihan. Additionally, as I've been calling for since early 2013, the bank will likely raise its dividends after it asks permission, which should come after the bank passes its stress test this year.
The company has a modest forward P/E ratio of 10.38. The company has a very attractive price/book value of 0.81 - obviously, the risk of the company's legal issues is priced in. Should the company move past these roadblocks, there's no reason to not see Bank of America trading well over $25 before the end of 2014.
Disclosure: I am long BAC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.