- Barron's Andy Barry says Wells Fargo's (NYSE:WFC) reported results appear to overstate its underlying earnings power.
- Citing Barclays analyst Jason Goldberg, it notes that "the underlying quarterly profit power of Wells Fargo appears to be closer to 90 cents a share than the roughly $1 that it has reported for 12 quarters. It's true that there is no definition of core bank earnings, and some analysts come up with higher levels of core results than Goldberg does. But the bank's reported results appear to overstate underlying earnings power from its core banking and wealth-management businesses."
- "While it's hard to argue that there is much downside in Wells Fargo shares at their current level, the stock may trail peers in the coming year if earnings estimates continue to come down and there is greater scrutiny of the bank's results."
- UBS analyst Brennan Hawken wrote after the Q2 release that the "results reinforce our concerns around WFC's earnings power." He cited ongoing pressure on the bank's margins and wrote that "we expect the consensus [earnings] to continue trending downward." He carries a Sell rating and $45 price target.
- Barron's sums it up: "Wells Fargo has one of banking's top franchises, but its reported results appear to overstate its underlying earnings power. Peers such as JPMorgan (NYSE:JPM), with cleaner profits and lower valuations, look more attractive."