This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Buy Wells Fargo Ahead of Earnings

Stocks in this article: WFCJPMC

NEW YORK ( TheStreet) -- While most banks tend to fall within the same category and are thus appraised on similar standards and metrics, it has become clear that Wells Fargo (WFC) has always strived to be a cut above the rest.

Although the third-quarter report was not up to the bank's usual standards, relative to expectations, it was actually still pretty good. It posted $4.9 billion in net income, continuing a performance that has now reached 11 consecutive quarters of profit growth.

Not only was this a company record, but it also represented year-over-year increase of 22% -- outpacing both JP Morgan (JPM) and Citigroup (C). Now that Wells' fourth-quarter report is due out Friday, expectations are even higher.

Analysts are expecting Well Fargo to post earnings of 89 cents per share on revenue of $21.29 billion. Essentially, the Street is looking for another 22% growth in profits, unheard of for a enterprise this size. However, although revenue estimates suggest a modest 3% growth year-over-year, it also represents a 3% sequential decline.

This may raise some eyebrows, but then again, the entire sector has been impacted by the recent financial climate, including poor long-term interest rates. Despite these concerns, Wells Fargo was still able to retain almost $10 billion in first mortgages in its Q3. This should be an area of interest during the Q4 conference call.

Currently, Wells Fargo has a considerable market share position of 33% in loan originations. If the bank can build on its Q3 performance, during which it posted $10 billion in mortgage originations, investors buying ahead of the report will have been well served.

In 2012, the bank was an outperformer in this category and it is certain to continue as the housing recovery advances. Overall, investors should expect an excellent report. And it really comes down to the fact that Wells Fargo has an excellent brand.

From an investment perspective, there will always be a premium placed on banks with above-average growth prospects that still meets certain criteria of safety. Wells Fargo continues to benefit from a business that is unburdened from unfavorable risk while consistently demonstrating solid execution and leverage.

The stock is trading at a considerable discount to long-term growth potential. Investors should expect gains of 20% as the stock should reach $40 by its third quarter report.

At the time of publication, the author held no position in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a private investor with an information technology and engineering background and has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,805.41 +127.51 0.76%
S&P 500 1,964.58 +13.76 0.71%
NASDAQ 4,483.7150 +30.9230 0.69%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs