Rick Pendergraft's Avatar
Rick Pendergraft
published in Blogs
Oct 09, 2020
Bank Earnings Expected to Jump from Q2, but Down from Q3 2019

Bank Earnings Expected to Jump from Q2, but Down from Q3 2019

The four biggest banks in the United States are set to announce earnings next week and the expectations show estimates are up from the second quarter, but down from last year.

The banks I’m referring to are Bank of America (BAC), Citigroup (C), JPMorgan Chase (JPM), and Wells Fargo (WFC). Rather than list each company and its EPS estimate one by one, I put together the table below on Tickeron’s Screener. It shows all four companies and the current EPS estimate for the third quarter. We see that all four banks are expected to show pretty solid growth in earnings compared to the EPS numbers reported in the abysmal second quarter.

I wanted to take things a step farther and wanted to include a comparison to the results from the third quarter of 2019. The table below shows each bank’s EPS figures from Q2 2020 as well as Q3 results from 2019. All four banks are expected to show pretty sharp declines in earnings when compared to the results from the same period one year ago.

These results reflect what has happened in the economy since the COVID-19 pandemic hit the global economy in a massive way. The sharp selloff in the overall market from mid-February through late March hit the banks even harder. All four of the companies listed in the tables fell over 40% with Citi taking a hit of over 54% at the lows. Like the overall market, the banks have rallied sharply since March 23, but unlike the S&P, the banks aren’t back up to their pre-selloff levels.

Banks have seen a slight boost in the last few weeks and have outperformed the overall market. Part of that is due to a widening spread between short-term interest rates and long-term rates. A wider spread tends to help banks because they borrow at the short-end of the credit cycle and they tend to lend at the long-end of the cycle. This can help boost the profitability.

Looking at the fundamental factors and technical indicators ahead of the earnings reports, the fundamentals show themes in a couple of areas. The Outlook Ratings are positive for three out of the four, but only a neutral rating for Wells Fargo. The biggest trouble spot seems to be the SMR Ratings as all four get poor ratings from this indicator that measures sales growth, profit margin, and return on equity.

The technical picture seems to be a little better than the fundamental picture. Three of the four stocks have bullish signals from the RSI, the MACD, and the Momentum Indicator. JPMorgan Chase has two bullish signals and four neutral signals. Bank of America has four bullish signals and two neutral signals. All four have more bullish signals than bearish signals.

As for the overall picture, all four stocks currently have “buy” ratings on them and those ratings are primarily based on the short-term technical indicators. Personally I would rank Bank of America a little higher than JPMorgan Chase. I would rank Citigroup third and Wells Fargo would be ranked fourth. The reason for these rankings boils down to several factors. The fact that Bank of America has four bullish signals from the technical indicators is a big plus, and the fundamental ratings are very similar for JPMorgan. The technical picture gives the edge to BAC.

Citi has more negative readings than positive readings on the fundamental side, but has four bullish signals on the technical side. Wells Fargo has had many issues in recent years and that seems to be reflected in the stock performance in the last few years. WFC is down 43% in the past year and that is by far the worst performance of the four. It also only has two bullish signals compared to one bearish signal on the technical side.

One last factor in why I give a slight edge to Bank of America is the sentiment toward the four stocks. BAC has the highest short interest ratio of the four stocks and only 57.7% of analysts have the stock rated as a “buy”. Citigroup’s buy percentage is 83.3% and JPMorgan’s is 65.4%. Wells Fargo’s is 25.9%, but it has had so many legal issues and such that the bearish sentiment appears to be warranted.

When it comes to sentiment analysis, you want to view things from a contrarian viewpoint. The idea is that the less enthusiasm there is toward a stock, the greater the chance that it can rally as the enthusiasm grows more bullish. If the sentiment is already extremely bullish, the chances of a letdown are much greater.  

Related Tickers: BAC
Related Portfolios: BANKS
Sergey Savastiouk's Avatar
Sergey Savastiouk
published in Blogs
Mar 07, 2021
4 Tricks Hedge Funds Use to Get Ahead

4 Tricks Hedge Funds Use to Get Ahead

If the stock market were Major League Baseball, hedge funds and institutional investors would be the pros on championship teams while everyday self-directed investors (SDIs) are the benchwarmers in the minors.It’s how they get ahead, and it’s why 90% of SDIs lose money trying to play (invest and trade) in the major leagues. The 4 tricks we discuss below are rooted in one common theme: they all use Artificial Intelligence and algorithms to generate data and ideas.
John Jacques's Avatar
John Jacques
published in Blogs
Mar 22, 2018
A.I. Stock Market Predictions: Head & Shoulders

A.I. Stock Market Predictions: Head & Shoulders

Statistics for the Head-and-Shoulders Bottom Pattern The days where only hedge funds used algorithms to trade stocks are officially over. Now retail investors can use Artificial Intelligence (A.I.  Here’s an example of the algorithm in action: Late last year, Tickeron’s A.I.
Sergey Savastiouk's Avatar
Sergey Savastiouk
published in Blogs
Jul 10, 2020
3 Stocks to Buy if Coronavirus Second Wave Hits

3 Stocks to Buy if Coronavirus Second Wave Hits

By analyzing market trends from the first wave, you can predict behavior for the second. Technology stocks have performed at historic levels this year, but the market is severely overbought.To compensate for that, look at performance during Q1 and Q2, the height of global Covid shutdowns.
Edward Flores's Avatar
Edward Flores
published in Blogs
Feb 06, 2021
How to Become the Millionaire Next Door

How to Become the Millionaire Next Door

The Golden Gate Bridge is always a fixture of these walks too, one of man's most beautiful creations.  As we were walking, at one point she turned to me and said, "Man, I'll never have a million dollars."" My girlfriend is 27 years old and works as a graphic designer, making about $75,000 a year.
Alla Petriaieva's Avatar
Alla Petriaieva
published in Blogs
Feb 23, 2021
Is Ethereum’s Bomb about to Explode?

Is Ethereum’s Bomb about to Explode?

Ethereum’s software is set for an update in October.Until it is finished, participants in the Ethereum blockchain must determine how to delay the difficulty bomb – code that necessitates a steadily increasing amount of computer power to mine blocks and unlock rewards – that is already in place.
Sergey Savastiouk's Avatar
Sergey Savastiouk
published in Blogs
Aug 07, 2018
When Is the Next Recession Coming?

When Is the Next Recession Coming?

However, we also know that economists predicted 22 recessions out of 11 that took place since 1945. Are there real recession signs we should watch for?Indeed, the answer is yes, and here are a few very important ones: The first one is almost obvious and known to everyone – it is the Fed.
Abhoy Sarkar's Avatar
Abhoy Sarkar
published in Blogs
May 22, 2020
Central banks have been buying $2.4 billion in assets every hour for the past two months

Central banks have been buying $2.4 billion in assets every hour for the past two months

Some $17.8 billion has been poured into  bond markets over the past week, the biggest move in more than three months.Around $3.5 billion has been invested into gold, the second largest on record. 
Rick Pendergraft's Avatar
Rick Pendergraft
published in Blogs
Feb 07, 2021
Mid-January Short Interest Report Shows 8 Stocks with Good Fundamentals and High Short Interest
Sergey Savastiouk's Avatar
Sergey Savastiouk
published in Blogs
Mar 10, 2021
How to Start Trading Penny Stocks

How to Start Trading Penny Stocks

Penny stocks have long been marginalized within the professional investment community, oftentimes being painted with a broad brush of simply being “too risky.” Leonardo DiCaprio’s depiction of the penny stock peddling conman, Jordan Belfort, in the Wolf of Wall Street certainly didn’t help.Here are four reasons to start trading them now. Reason #1: Let’s State the Obvious -- Penny Stocks are Cheap A single share of Apple Inc. costs over $350.
Abhoy Sarkar's Avatar
Abhoy Sarkar
published in Blogs
May 08, 2020
US unemployment rate jumps to 14.7%, the highest in series history

US unemployment rate jumps to 14.7%, the highest in series history

The U.S. economy’s employment fell by -20.5 million in April. The coronavirus crisis led to unemployment rate soaring to 14.7% in the U.S, the highest rate in the Bureau of Labor Statistics-tracked series history that goes back to 1948. However, the figures were better compared to several economists'/analysts' forecasts of 22 million job losses and 16% unemployment rate.  Another unemployment measure that includes those who have stopped looking for work as well as those holding part-time jobs for economic reasons also touched an all-time high of 22.8%.