Why Bank of America (BAC) Stock Is Higher Today

NEW YORK (TheStreet) -- Bank of America  (BAC) and the Justice Department are nearing a landmark deal in which the bank will pay $16 billion to $17 billion to resolve allegations of mortgage-related misconduct in the run-up to the financial crisis, sources told the Wall Street Journal.

The bank agreed to pay about $9 billion in cash to the federal government, states and other government entities, sources said, as part of an overall pact that could be finalized this month. Additional money would be directed at consumer relief, such as reducing mortgage balances for struggling homeowners, the Journal said.

Shares of Bank of America are up 0.86% to $15.33 in pre-market trade.

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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 multiple 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 attractive valuation levels, expanding profit margins and notable return on equity. 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 86.47%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, BAC's net profit margin of 9.28% significantly trails the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 8.2%. Since the same quarter one year prior, revenues slightly dropped by 5.1%. 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.
  • BANK OF AMERICA CORP's earnings per share declined by 40.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, BANK OF AMERICA CORP increased its bottom line by earning $0.91 versus $0.25 in the prior year. For the next year, the market is expecting a contraction of 12.1% in earnings ($0.80 versus $0.91).
  • 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.


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