Bank of America (BAC) is scheduled to report their third quarter 2009 results before the market opens on Friday, October 16. Based on our analysis, we at EarningsPreviews.com are expecting BAC to report worse than expected quarterly results that will disappoint Wall Street's consensus expectations.
Analyst Expectations
We are forecasting revenues of $28.05 billion and EPS of ($.08). This would represent a 43% increase in revenues from last year's $19.62 billion in the same period. The current analyst consensus estimates calls for revenues of $27.52 billion and EPS of ($.06).
Wall Street doesn't appear to be nearly as optimistic about Bank of America's third quarter earnings results as it was last quarter. Last quarter, many recognized that Wall Street's consensus estimates were too conservative, but there appears to be much more uncertainty about BAC's third quarter results. The abrupt resignation of CEO Ken Lewis and the lack of a clear successor are no doubt contributing to some of the uncertainty surrounding the financial stock.
While Bank of America's stock has experienced a furious rally since dropping below $3 in March, the stock hasn't move much at all over the last two months as investors wait to see further signs of improvement. While we continue to view Bank of America's acquisition of Merrill Lynch as a tremendous long-term boost, we expect that uncertainty surrounding their CEO departure as well as less than stellar earnings could negatively impact the stock in the short term.
Share Performance
Since the beginning of the year, Bank of America's shares have gained 24%. In 2008, BAC's shares fell 63% and badly underperformed the 34% decline in the Dow Jones industrial average.
Valuation
Shares are now trading at 19x consensus 2010 EPS estimates. This is inline with the relative valuations of their peer group. While Bank of America continues to look attractively valued for long-term investors, we would not recommend buying stock until after the earnings report given the uncertainty surrounding the company right now.
Recommendation: Hold with an $18 price target.
