Will These Lower EPS Estimates Hurt Bank of America (BAC) Stock Today?

Story updated at 9:55 a.m. to reflect market activity.

NEW YORK (TheStreet) -- Barclays (BCS) cut its 2014 and 2015 EPS estimates for Bank of America (BAC) Wednesday.

Bank of America fell -0.1% to $15.57 in morning trading.

The firm set a price target of $18 for the bank with an "equal weight" rating. Barclays analysts lowered its second quarter estimates to 29 cents a share from 31 cents a share.

"We are also lowering our 2014E EPS to $0.90 (-$0.05) and our 2015E EPS to $1.50 (-$0.05), primarily driven by the continued subdued trading environment," analyst Jason M. Goldberg wrote. "While there has been recent media coverage regarding a potential settlement to the RMBS investigation, we have not included any charges in our estimate."

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Separately, TheStreet Ratings team rates BANK OF AMERICA CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate BANK OF AMERICA CORP (BAC) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, expanding profit margins, notable return on equity and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for BANK OF AMERICA CORP is currently very high, coming in at 84.82%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -1.08% is in-line with the industry average.
  • BAC, with its decline in revenue, slightly underperformed the industry average of 2.6%. Since the same quarter one year prior, revenues slightly dropped by 4.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, BANK OF AMERICA CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: BAC Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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