Earnings Preview: Wells Fargo

| About: Wells Fargo (WFC)

Wells Fargo & Co. (NYSE:WFC), through its subsidiaries, provides retail, commercial, and corporate banking services primarily in the United States. The company operates in three segments—Community Banking; Wholesale Banking; and Wealth, Brokerage, and Retirement.

It is scheduled to report its Q2 2012 results on July 13, 2012, before the market opens. In this article, I will recap the historical results of the company, latest EPS estimates versus surprises, latest developments and closest competitors' development.

Technical Overview


The stock has a market capitalization of $176.05B and is currently trading at $33.13 with a 52-week range of $22.58-$34.59. The stock performance year to date is 21.49%. It is currently trading above 20, 50 and 200 SMA.

Key Metrics

  • Trailing P/E: 11.42
  • Forward P/E: 9.05
  • Price/Sales: 2.36
  • Price/Book: 1.30
  • PEG Ratio: 1.09
  • Total Debt: 180.72B
  • Annual dividend yield: 1.80%
  • Return on Equity: 11.87%
  • Return on Assets: 1.30%

Recent EPS Actuals Vs. Estimates

The company has met or beaten analysts' estimates in the last two quarters. In the last quarter, it reported $0.75 EPS, beating analyst estimates of $0.73.

The consensus EPS is $0.81, based on 31 analysts' estimates, up from $0.70 a year ago. Revenue estimates are $21.32B, up from $20.39B a year ago. The median target price by analysts for the stock is $38.00.

Average recommendation: Overweight

Source: Marketwatch

Analyst Upgrades and Downgrades

  • On April 17, 2012, Compass Point reiterated its Buy rating for the company.
  • On April 16, 2012, RBC Capital Mkts reiterated its Outperform rating for the company.
  • On April 16, 2012, Barclays reiterated its Overweight rating for the company.
  • On January 18, 2012, FBR Capital reiterated its Outperform rating for the company.
  • On January 18, 2012, Compass Point reiterated its Buy rating for the company.

Latest Developments

  • On June 25, 2012, Wells Fargo & Co. announced that it has reached a definitive agreement to acquire WestLB's subscription finance portfolio. The portfolio contains approximately $6B in commitments (approximately $3B outstanding).
  • On June 15, 2012, Wells Fargo & Co. announced that it has doubled its ExpressSend remittance network payout locations in India through an agreement with HDFC Bank Limited.
  • On May 30, 2012, Reuters reported that Wells Fargo & Co. has promised $432.5M in lending and other payments to end a lawsuit accusing the bank of discriminatory lending practices in Memphis, Tennessee.
  • On May 1, 2012, Reuters reported that Citigroup Inc, Morgan Stanley, UBS AG and Wells Fargo & Co. agreed to pay more than $9.1M in fines and restitution for selling leveraged and inverse exchange-traded funds 'without reasonable supervision'.
  • On April 24, 2012, Wells Fargo & Co. announced a quarterly common stock dividend of $0.22 per share. The dividend is payable June 1, 2012, to stockholders of record on May 4, 2012.
  • On April 24, 2012, Wells Fargo Bank, part of Wells Fargo & Co. announced that it has closed the acquisition of the North American reserved-based and related diversified energy lending business of BNP Paribas.
  • On March 8, 2012, Wells Fargo & Co. announced that it has signed an agreement with Mexico City-based Banco Azteca, S.A. de C.V., a financial services company owned by Grupo Elektra.
  • On February 29, 2012, Rigrodsky & Long, P.A. announced that it has launched an investigation on behalf of the shareholders of Wells Fargo & Co., with respect to whether the company and certain of its officers and/or directors have possibly violated the federal securities laws.
  • On February 21, 2012, Wells Fargo Bank, part of Wells Fargo & Co. announced that it has entered into a definitive agreement to acquire the North American reserve-based and related diversified energy lending business of BNP Paribas.
  • On February 9, 2012, Dow Jones reported that JPMorgan Chase & Co and Wells Fargo & Co. have reserved for their respective $5.3B share of the settlement big banks reached with the federal government and state attorneys general.
  • On February 1, 2012, Wells Fargo & Co.'s Wells Fargo Bank, N.A. announced that it has completed its acquisition of Burdale Financial Holdings Limited (Burdale) and the portfolio of Burdale Capital Finance Inc. from Bank of Ireland.
  • On January 24, 2012, Wells Fargo & Co. announced a quarterly common stock dividend of $0.12 per share. The dividend is payable March 1, 2012, to stockholders of record on February 3, 2012.

Competitors

Wells Fargo & Co. operates in Money Center Banks industry. The company could be compared to Bank of America Corporation (NYSE:BAC), Citigroup, Inc. (NYSE:C), JPMorgan Chase & Co. (NYSE:JPM), and U.S. Bancorp (NYSE:USB). Below is the table comparison of the most important ratios among these companies and the industry.

Below is the chart comparison with the stock price changes as a percentage for the selected companies and S&P 500 index for the last one-year period.

WFC ChartClick to enlarge

WFC data by YCharts

Competitors' Latest Development

  • On July 4, 2012, Reuters reported that U.S. energy regulators have subpoenaed JPMorgan Chase & Co. to produce 25 internal emails as part of an investigation into whether the bank manipulated electricity markets in California and the Midwest.
  • On July 3, 2012, Bank of America Corp announced that the Board of Directors has authorized dividends on preferred stock. A quarterly cash dividend of $0.38775 per depositary share on the 6.204% Non-Cumulative Preferred Stock, Series D, is payable on September 14, 2012, to shareholders of record as of August 31, 2012.
  • On July 3, 2012, Reuters reported that JPMorgan Chase & Co.'s One Equity Partners, the company's private investment arm, will buy technology services firm M*Modal Inc. for about $1.1B in cash.
  • On June 26, 2012, Citigroup announced that it has been awarded a contract renewal of its fund services to Victory Capital Management and to the Victory Funds. Citi will continue to provide administration and accounting services to Victory Capital Management and serve as the global custodian and transfer agent to the Victory Funds.
  • On June 25, 2012, Reuters reported that Julius Baer Gruppe AG in talks with Bank of America Corporation about buying Merrill Lynch's non-U.S. wealth management unit, is particularly interested in its presence in Asia and Latin America.
  • On June 25, 2012, Integra Mining Ltd. announced that JPMorgan Chase & Co. and its affiliates have ceased to be shareholders of the company effective April 9, 2012.
  • On June 22, 2012, Reuters reported that ratings agency Moody's downgraded 15 banks on Thursday, lowering credit ratings by one to three notches to reflect the risk of losses they face from volatile capital markets activities, but banks criticized the move as backward-looking.
  • On June 21, 2012, Reuters reported that Bank of America Corp. directors reached a definitive settlement of litigation by shareholders, who accused the bank of overpaying for Merrill Lynch & Co, a federal judge said on Wednesday.
  • On June 21, 2012, Reuters reported that JPMorgan Chase & Co.'s asset management business has created a new unit, which will oversee $100B in assets under management and incorporate teams from the company's investment management and wealth management divisions.
  • On June 19, 2012, Reuters reported that Julius Baer Gruppe AG was in talks about buying Bank of America Corp.'s non-U.S. wealth management operations, reported to be worth up to $2B.
  • On June 19, 2012, Reuters reported that Japan has excluded Nomura Holdings, Inc. from working on the government's sale of roughly $6B worth of JAPAN TOBACCO INC. shares.
  • On June 19, 2012, US Bancorp announced that it has declared a quarterly dividend of $0.195 per common share, payable July 16, 2012, to shareholders of record at the close of business on June 29, 2012.
  • On June 15, 2012, Bank of America Corp. announced the Board of Directors authorized a regular quarterly dividend of $18.125 per share on the 7.25% Non-Cumulative Perpetual Convertible Preferred Stock, Series L. The dividend is payable on July 30, 2012, to shareholders of record as of July 1, 2012.
  • On June 12, 2012, Indophil Resources NL announced that Bank of America Corporation and its related corporate bodies have ceased to be shareholders of the company effective June 7, 2012.
  • On June 11, 2012, REN Redes Energeticas Nacionais SGPS SA (NYSE:REN) announced that on June 11, 2012, JP Morgan Securities Ltd, a subsidiary of JPMorgan Chase & Co, acquired 28,131,422 ordinary shares class A, corresponding to 5.272% of REN's share capital .
  • On June 6, 2012, Reuters reported that U.S. bank regulators will review whether JPMorgan Chase & Co. executives should have to give back compensation due to the bank's failed hedging strategy that has produced at least $2B in losses.
  • On May 31, 2012, Dow Jones reported that Citigroup Inc isn't planning to sell its Polish unit, Bank Handlowy w Warszawie SA. Other information of the deal were not disclosed.
  • On May 31, 2012, Morgan Stanley announced that it has advised Citigroup Inc. that on June 1, 2012, it intends to give notice that it is exercising its right to purchase an additional 14% of Morgan Stanley Smith Barney Holdings LLC (MSSB).
  • On May 25, 2012, Citigroup Inc announced that it has sold 404M common shares in Akbank T.A.S. (Akbank) through an equity offering representing 10.1% of the equity interest in the company for TRY5.24 per share.
  • On May 25, 2012, Bank of America Corp announced that it and Barclays Bank PLC have entered into an agreement with Equity Residential and Lehman Brothers Holdings Inc pursuant to which Bank of America and Barclays will sell their remaining 26.5% interest in Archstone, a privately held owner, operator and developer of multifamily apartment properties, for a purchase price of $1.58B to Lehman pursuant to Lehman's exercise of its right of first offer.
  • On May 23, 2012, Reuters reported that the head of the U.S. Securities and Exchange Commission told lawmakers on Tuesday that her agency is probing JPMorgan Chase & Co.'s financial reporting, and emphasized that big banks are required to publicly disclose changes to the models they use to measure risk.
  • On May 22, 2012, Reuters reported that Credit Suisse Group AG (NYSE:CS) had won the latest auction of mortgage-linked collateralized debt obligations from The New York Fed's Maiden Lane III portfolio of assets assumed from American International Group, Inc. during the insurer's bailout in 2008.
  • On May 22, 2012, Reuters reported that the U.S. government has filed three lawsuits against a group of large banks over losses on soured mortgage debt purchased by two small Illinois banks that failed in 2009.
  • On May 21, 2012, Reuters reported that JPMorgan Chase & Co.'s CEO Jamie Dimon took another step in the wake of $2B loss, or more, on derivatives by announcing on Monday that the company will quit spending capital on stock buybacks.
  • On May 19, 2012, Reuters reported that Citigroup Inc and its Chief Executive Vikram Pandit on Friday won a dismissal of New York real estate developer Sheldon Solow's lawsuit accusing the company of securities fraud for hiding the bank's risks during the 2008 financial crisis.
  • On May 19, 2012, Reuters reported that The Commodity Futures Trading Commission (CFTC) has opened an investigation into possible wrongdoing at JPMorgan Chase & Co in connection with the bank's multi-billion-dollar trading loss, a source familiar with the probe told Reuters.
  • On May 18, 2012, Law Offices of Howard G. Smith announced that a class action lawsuit has been filed in the United States District Court for the Southern District of New York on behalf of all purchasers of the common stock of JPMorgan Chase & Co. between April 13, 2012, and May 11, 2012, inclusive (the Class Period).
  • On May 17, 2012, Reuters reported that JPMorgan Chase & Co., CEO Jamie Dimon took another step that showed humility and caution in the wake of a stunning $2B loss, or more, on derivatives by announcing on Monday that the company will quit spending capital on stock buybacks.
  • On May 16, 2012, Reuters reported that The FBI has opened an inquiry into the multi-billion-dollar trading losses at JPMorgan Chase, stepping up pressure on the bank after key U.S. agencies said they were looking into high-risk trades that first drew regulators' attention last month.
  • On May 15, 2012, JPMorgan Chase & Co. announced that its Board of Directors declared a quarterly dividend of $0.30 per share on the outstanding shares of the corporation's common stock.
  • On May 11, 2012, JPMorgan Chase & Co. announced that it has suffered $2B or more in trading losses. A May 11, 2012, Wall Street Journal article indicates the "losses stemmed from wagers gone wrong in the bank's Chief Investment Office" and involved losses in derivative positions.
  • On May 11, 2012, Levi & Korsinsky announced that it is investigating potential claims on behalf of purchasers of JPMorgan Chase & Co. securities concerning possible breaches of fiduciary duty.
  • On May 10, 2012, Citigroup Inc announced that it has been appointed by Phase4 Ventures, London-based venture capital firm, to provide document safekeeping and fund administration services.
  • On May 10, 2012, Reuters reported that the New York Federal Reserve sold all its TRIAXX collateralized debt obligations from a portfolio of assets that was used in the government bailout of insurer American International Group, Inc. to Bank of America Corp's Merrill Lynch, following a competitive bid process with eight other Wall Street firms.
  • On May 7, 2012, Rompres reported that five new United States companies will be listed on the Alternative Trading System of the Bucharest Stock Exchange International Department, starting on May 10, 2012.
  • On April 25, 2012, JPMorgan Chase & Co. announced that Freepoint Commodities LLC, has entered into a definitive agreement to acquire J.P. Morgan Metals & Concentrates LLC, merchant of physical base metal concentrates and copper cathodes.
  • On April 19, 2012, Reuters reported that a federal judge on Wednesday dismissed claims against Goldman Sachs Group Inc, JPMorgan Chase & Co. and 40 other defendants that they helped mislead investors in General Electric Co's $12.2B stock offering in 2008.
  • On April 13, 2012, Reuters reported that Bank of America Corporation and US Bancorp have been sued by a Chicago pension fund that said they failed to protect investors in their roles as trustees for mortgage backed securities for Washington Mutual Inc.
  • On April 4, 2012, Reuters reported that according to the Commodity Futures Trading Commission (CFTC) JPMorgan Chase & Co will pay $20M to settle charges that it unlawfully handled customer segregated funds at Lehman Brothers Holdings Inc.
  • On March 20, 2012, Reuters reported that JPMorgan Chase & Co. agreed to pay $150M to settle a lawsuit by pension funds and other investors accusing the U.S. bank of imprudently investing their cash in a risky debt vehicle that collapsed in 2008.
  • On March 15, 2012, JPMorgan Chase & Co. announced that it declared a dividend on the outstanding shares of the corporation's Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series I in the amount of $395.00 per share (which is equivalent to $39.50 per related Depositary Share).
  • On March 15, 2012, Prairie Downs Metals Limited announced that JPMorgan Chase & Co. and its affiliates have ceased to be a substantial holder in the company as of January 25, 2011.
  • On March 13, 2012, US Bancorp announced that the Board of Directors of U.S. Bancorp has approved a 56% increase in the dividend rate on U.S. Bancorp common stock to $0.78 on an annualized basis, or $0.195 on a quarterly basis.
  • On March 8, 2012, JPMorgan Chase & Co and AirPlus International announced the formation of a strategic partnership to help multinational organizations optimize processes and strengthen control of their corporate card and travel expense management programs.

Sources: Yahoo Finance, Google Finance, Marketwatch, Finviz, Reuters.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.