Mixed Economic Reports
The Labor Department said Thursday that initial unemployment claims for the week ended Feb. 16 increased by 20,000 to a seasonally adjusted 362,000, from a revised 342,000 the previous week. Economists expected claims to rise to 347,000, according to Zacks. The four-week moving average for jobless claims rose to 360,750 from the previous average of 352,750. Markit Economics said Thursday its manufacturing output index for February showed the "sharpest rise in manufacturing output in almost two years," with a reading of 58.1, increasing from 56.8 in January. However, the Purchasing Managers' Index (PMI) came in at 55.2, down from 55.8 in January. An index reading of over 50 indicates economic expansion. Markit said in its release that "incoming new work received by manufacturers also rose strongly during February. However, the rate of increase eased from January's 32-month peak." The National Association of Realtors (NAR) said existing-home sales in the U.S. increased by 0.4% in January to a seasonally adjusted annual rate of 4.92 million from a revised 4.90 million in December. The sales pace in January was up 9.1% from a year earlier.
Shares of Wells Fargo have returned 4% this year, following a 27% gain in 2012. The shares trade for 1.6 times tangible book value, according to Thomson Reuters Bank Insight, and for 9.1 times the consensus 2014 earnings estimate of $3.89. The consensus 2013 EPS estimate is $3.65. Based on a quarterly payout of $0.25, the shares have a dividend yield of 2.82%. Wells Fargo's valuation to the consensus forward earnings estimate is only slightly above the rest of the "big four" U.S. banks, despite being the strongest and steadiest earner among the group for many years. The company's operating return on average assets (ROA) was 1.41%, rising steadily over the past five years, from a low of 0.44% in 2008. Here's a quick comparison to the rest of the big four:
- Shares of Bank of America (C) were down over 3% on Thursday to close at $11.41. The stock trades for 8.9 times the consensus 2014 EPS estimate of $1.29. The company's ROA over the past five years has ranged from a negative 0.09% to a positive return of 0.26%. Bank of America is arguably the most risky play among the big four, with a political target on its back and legacy mortgage risk from the acquisition of Countrywide Financial in 2008.
- Citigroup (C) was down 2% to close at $42.35. The company's shares trade for 8.1 times the consensus 2014 EPS estimate of $5.20. Citi's ROA has ranged from a negative 1.28% to positive 0.57% over the past five years. Citigroup is in the midst of a multiyear transformation, as the company frees up excess capital by winding down non-core assets in the Citi Holdings subsidiary. The company on Tuesday agreed to acquire a $7 billion private label billion credit card portfolio from Capital One (COF). Acquisitions are among several possible strategies to help Citi recapture its $55 billion deferred tax asset.
- Shares of JPMorgan Chase (JPM) declined 1% to close at $48.25, trading for 8.4 times the consensus 2014 EPS estimate of $5.77. The company's ROA improved over the past five years from 0.21% to 0.94%. The improved results in 2012 came despite widely publicized hedge trading losses that totaled $6.2 billion.
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