Wells Fargo & Company
) to beat earnings expectations when it reports second-quarter
2013 results before the opening bell tomorrow, Jul 12, 2013.
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Why a Likely Positive Surprise?
Our proven model shows that Wells Fargo has the right combination
of two key ingredients to beat earnings.
Positive Zacks ESP:
The earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) for Wells Fargo is +1.09% - the difference between the Most
Accurate Estimate of 93 cents and the Zacks Consensus Estimate of
92 cents. This indicates a likely positive earnings surprise.
Zacks Rank #3 (Hold):
Wells Fargo's Zacks Rank #3 increases the predictive power of its
ESP. The combination of its Zacks Rank and Earnings ESP makes us
confident of a positive earnings surprise in the to-be-reported
Note that stocks with Zacks Ranks #1, #2 and #3 have a
significantly higher chance of beating earnings. The Sell rated
stocks (#4 and #5) should never be considered going into an
Drivers of Better-than-Expected Earnings
As capital market activity remained strong during the April-June
period with continued support from the Fed, the propensity to
invest in the market increased. Given the prevailing low
interest-rate environment, there was a surge in demand for
financial instruments that are not interest rate sensitive and
offer better returns. As a result, non-interest revenue sources,
primarily trading revenue, should provide strong support to the
top line this quarter.
Though sluggish loan growth will keep interest income under
pressure and increased litigations will raise total expenses, an
uptick in mortgage activity and lesser credit loss provisions are
expected to support bottom-line improvement in the to-be-reported
Moreover, rising home prices and falling unemployment have
increased lending through credit cards. As a result, it is
anticipated that the company will report better results in its
credit card business.
Activities of Wells Fargo during the second quarter of the year
were inadequate to win analysts' confidence. The Zacks Consensus
Estimate for the second quarter remained stable at 92 cents per
share over the last 7 days.
Other Stocks to Consider
Wells Fargo is not the only bank looking up this earnings season.
Here are some other banks you may want to consider as our model
shows these have the right combination of elements to post an
earnings beat this season:
JPMorgan Chase & Co.
) has an earnings ESP of +2.11% and carries a Zacks Rank #2
(Buy). Its second quarter release is scheduled on the same day as
The earnings ESP for
) is +0.86% and it carries a Zacks Rank #3. The company is
scheduled to release its second-quarter results on Jul 15.
) has an earnings ESP of +1.37% and carries a Zacks Rank #3. It
is scheduled to report its second-quarter results on Jul 18.
Wells Fargo and JPMorgan, with exposure in almost all banking
businesses, are the first among the banking big shots to report
second-quarter earnings. Therefore, their earnings releases are
going to be a significant indicator of the performance of the key