Zacks Earnings Preview: Q4 Earnings: Banks In Focus

Jan 14, 2013, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Jan. 14, 2013 /PRNewswire/ -- Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes Bank of America (BAC), Wells Fargo (WFC), JPMorgan (JPM), Citigroup (C) and US Bancorp (USB)

(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)

To see more earnings analysis, visit http://at.zacks.com/?id=3207.

Every day, Zacks.com makes 4 stock picks available, free of charge. To see them, click here.

Looking Ahead to Q4 Earnings

The fourth quarter reporting season is underway, and we have results from 27 companies in the S&P 500 already (as of Friday, November 11th). The pace of reporting accelerates this week, though we don't get into the heart of the earnings season till the week after.

We will get fourth quarter earnings results from 69 companies, including 37 from the S&P 500. The earnings reports thus far have been relatively improved, but after more than a tenth of the earnings reports out by the end of the week, we will have a better sample size to evaluate how this earnings season is unfolding.

The performance of the 27 companies that have already reported are better in all respects compared to what these same companies did in the third quarter. The growth rate is higher, more companies are beating, and the median surprise is higher -- both for earnings and revenues.

But with 95% of the reports still to come, the more important story on the earnings front pertains to expectations from the coming reports. And there has been no letup in the downward adjustments to those expectations. Last week's foreclosure related banking settlement caused further negative revisions to estimates to a number of banks, particularly Bank of America (BAC). The Zacks Consensus estimate for Bank of America fell from 19 cents to 2 cents last week, a roughly $2 billion swing in earnings.

This week's earnings reports are heavily weighted towards Finance, with all the major banks coming out with fourth quarter results. We got solid earnings and revenue beats from Wells Fargo (WFC) due to its strong mortgage franchise, but the bank's net interest margin (NIM) remained under pressure.

This means that other banks with smaller mortgage businesses will be even more at the mercy of the unfavorable NIM backdrop. We'll know more this week, as Bank of America,JPMorgan (JPM), Citigroup (C) and many of the other major regional banks like US Bancorp (USB) report results, but expectations for Finance sector earnings have come down.

Total fourth quarter earnings for the Finance sector, which a few days back were expected to be up +9.7%, are now expected to be up only +2%. As a result, total earnings for the 473 S&P 500 companies that have still to report results are now expected to be down -1.2% from the same period last year.

About the Zacks Rank

Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988, #1 Rank stocks have generated an average annual return of +28%. During the 2000-2002 bear market, Zacks #1 Rank stocks gained +43.8%, while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have significantly underperformed the S&P 500 (+3% versus +10%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.

Zacks "Profit from the Pros" e-mail newsletter offers continuous coverage of the industries and the stocks poised to outperform the market. Click to subscribe to this free newsletter today.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros.  In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.

Follow us on Twitter:  http://twitter.com/zacksresearch

Join us on Facebook:  http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

http://www.zacks.com

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

 

SOURCE Zacks Investment Research, Inc.



RELATED LINKS

http://www.zacks.com