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Last quarter's results from Bank of America Corp (NYSE: BAC ) were something of a mixed bag. Although the company managed to top its earnings estimates, BAC stock fell in response to the Q4 revenue shortfall. Fixed-income trading was the culprit. Rivals Goldman Sachs Group Inc (NYSE: GS ) and Morgan Stanley (NYSE: MS ) hit the same headwind.
And yet, one less-than-stellar quarter doesn't tell the whole story for current and would-be owners of Bank of America stock.
To that end, three charts put last quarter's results in context, by comparing them to the bank's fiscal history and its projected results. Perspective is everything.
Costs Are Going Down
Back in the middle of 2016, after culling roughly $8 billion worth of unnecessary spending during the first half of the year, CEO Brian Moynihan set a bold goal. He was going to reduce annual expenses by another $5 billion by 2018 .
It was not only a tall order, but it was also a moving target. Like any organization, a bank has to spend money to make money. The savings in question were relative to the revenue-growth opportunity at hand.
Nevertheless, spending in relation to revenue has indeed gone done - by quite a bit. BAC stock owners have watched operating expenses be whittled down from nearly 70% to 60%, on an annualized basis.
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Yes, last quarter's fixed-income trading revenue was a shambles for Bank of America, falling 14% to only $1.6 billion . Overall trading revenue was down 10% , which is a huge blow.
It was a fairly unusual event, though, driven by disinterest in bonds last quarter thanks to rising rates, but also compared to - perhaps unfairly - a swell of bond (and stock) trading activity from the last quarter of 2016 .
That flurry of activity stemmed from Donald Trump's surprisingly victorious bid for the nation's Presidency, which oddly enough didn't translate into a profit surge that particular quarter. The trading revenue that took a hit last quarter, by the way, is part of the "Global Markets" division.
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Within the context of its long-term history, last quarter's segmental revenue breakdown wasn't all that bad. In the bigger picture, all of the bank's divisions are still broadly making forward progress.
Looking Ahead for BAC Stock
Last but not least, an overarching question: Do you trust analysts, collectively speaking?
They're far from perfect, to be sure. By and large, though, they've got a pretty good handle on where companies are going.
And, while they're not exactly thrilled about the stock's prospects here (BAC stock is rated at just a little less than a "Buy" here, whereas a "Strong buy" is the best possible opinion), the analyst community agrees that revenue and earnings are not only going to continue improving, but their growth is likely to accelerate.
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If you need the numbers, analysts think Bank of America is going to earn $2.51 per share this year , up from last year's bottom line of $1.85 per share. The pros are calling for earnings of $2.87 next year.
Bottom Line on BAC Stock
They say a picture is worth a thousand words. There's no doubt that when it comes to weighing BAC stock, these charts help put things in perspective. Despite the stock's weakness since the end of January, Bank of America remains a pretty compelling prospect.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter , at @jbrumley.
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