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

Wells Fargo: Sum of All Earnings Fear Loser

Stocks in this article: BACCJPMWFCI:BKX

The company repurchased 27 million shares during the fourth quarter and said that a forward repurchase of another 6 million shares would settle during the first quarter.

Jefferies analyst Ken Usdin said in a report that although the market was focusing on the narrowing net interest margin, "we see flat net interest income as a decent result given huge deposit growth." However, the analyst added that "sustainability of mortgage banking will come into question given a 16% decline in its unclosed pipeline."

Usdin rates Wells Fargo a "Buy," with a $39 price target, and estimates the company will earn $3.55 a share during 2013, with EPS increasing to $3.65 in 2014.

Wells Fargo's fourth-quarter return on equity not return on average tangible common equity, which is often used for comparison was 11.97%, which was up from 10.95% a year earlier, and measured up quite well in the current environment for the largest U.S. banks.

During the preceding four quarters through the third quarter of 2012, Wells Fargo's operating ROE was 12.03%, according to Thomson Reuters Bank Insight, exceeding the ROE of the rest of the "big four" U.S. banking club and underlining the relatively low multiple for the company's shares to earnings estimates:

  • For Bank of America (BAC), the return on equity for the 12-month period ended Sept. 30 was 2.32%. The company's shares closed at $11.63 Friday, trading for 12 times the consensus 2013 earnings estimate of 97 cents, which is the highest forward price-to-earnings ratio among the big four. The consensus 2014 EPS estimate is $1.26. The company will announced its fourth-quarter results on Jan. 17, and on Monday said that earnings would be only ""modestly positive," as a result of its mortgage putback settlement with Fannie Mae (FNMA) and because of its participation in an $8.5 billion mortgage foreclosure settlement with federal regulators.
  • For Citigroup (C), the operating ROE for 12 months through Sept. 30 was 3.98%. Citi's shares closed at $42.34 Friday, trading for 9.1 times the consensus 2013 EPS estimate of $4.67. The consensus 2014 EPS estimate is $5.16.
  • JPMorgan's (JPM) operating ROE for the 12-month period ended Sept. 30 was 10.42%. The company's shares closed at $46.14 Friday, trading for 8.7 times the consensus 2013 EPS estimate of $5.31, which is the lowest forward P/E among the big four. The consensus 2014 EPS estimate is 2014. JPMorgan will announce its fourth-quarter results on Jan. 16.

Wells Fargo's shares trade for 9.7 times the consensus 2013 EPS estimate of $3.61. The consensus 2014 EPS estimate is $3.87.

Interested in more on Wells Fargo? See TheStreet Ratings' report card for this stock.

RELATED STORIES:








-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
2 of 2

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 16,461.32 -153.49 -0.92%
S&P 500 1,927.11 -14.17 -0.73%
NASDAQ 4,382.8470 -36.6310 -0.83%

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