With another earnings season pretty much over, investors have
begun to assess the winners and losers for Q1 results. One
surprising winner has been financials, as this segment has seen
growth on the earnings front
, and solid growth in terms of revenues as well.
However, every company in the space hasn't been so lucky, as a
few have seen decidedly lackluster reports. One bellwether that
has definitely fallen into this category is
Bank of America (
The company barely met sales estimates for the past quarter,
but missed earnings by three cents a share, with profits of just
20 cents per share. Immediately following the report, shares fell
about 5%, though the company has easily rebounded and is back at
52 week highs once more.
Yet while shares of BAC may have been able to shrug off the
weak earnings report in relatively short order, questions remain
for the company in the near term.
Other corners of the financial world
are starting to take leadership in the space, while the earnings
estimate picture isn't exactly favorable at this point in
Still, BAC has proven to be quite resilient as of late and
there are some positive trends appearing in key corners of the
bank's operations. These include strong mortgage originations,
setting aside less for bad loans, and better news from their
Merrill Lynch division.
In other words, BAC's outlook is quite mixed and the company
could go either way in the near term. But what do you think, are
you a buyer or seller of BAC at these levels?
Reasons to Buy:
Banks-Major Regional industry
is quite strong from a Zacks Industry Rank perspective.
Currently, the space is in the top third of all industries,
suggesting that it is in good company.
- Earnings growth (year-over-year) for the full year period
is quite impressive (triple digits), so there is definitely
reason to believe that BAC is back on track.
- Despite this projected earnings growth, the PEG is still
quite good coming in below 0.9. This is extremely favorable
when compared to the broad industry which has a PEG of
Reasons to Sell:
- Year-over-year sales growth is expected to be more or less
flat. It may be hard to grow earnings at a tremendous pace
without some more top line growth.
- The earnings estimate picture isn't exactly favorable,
either in the short or long term. For the current year, in the
past 30 days, 12 estimates have gone down while only 2 have
- The stock has a Zacks Rank #3 (Hold) in a top industry.
This means that there are other, higher ranked options in the
same space that could be better choices such as
So what do you think; will BAC continue to rebound, or is the
company approaching a top given some of the headwinds on the
Let us know in the comments below!
Want the latest recommendations from Zacks Investment
Research? Today, you can download
7 Best Stocks for the Next 30 Days
Click to get this free report >>
BANK OF AMER CP (BAC): Free Stock Analysis
FIFTH THIRD BK (FITB): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
To read this article on Zacks.com click here.