Here we go again. The earnings calendar is set to start filling up, with travel name Delta Air Lines (DAL, $41.76) and big banks BlackRock (BLK, $890.90) and Wells Fargo (WFC, $55.01) among the first companies slated to report fourth-quarter results.
“Earnings are expected to grow 20% in the fourth quarter – which, while down from prior quarters, is still quite strong – and end the year with nearly 40% growth,” says Brad McMillan, chief investment officer for Commonwealth Financial Network.
And if this metric exceeds that 20% estimate in Q4, it will mark the fourth straight quarter of earnings growth above 20%, according to John Butters, senior earnings analyst at FactSet Research Systems.
Still, “Analysts and companies have been less optimistic compared to recent quarters in their earnings estimate revisions and earnings outlooks for the fourth quarter to date,” Butters adds. As of mid-December, 56 S&P 500 companies had issued negative earnings per share (EPS) guidance, compared to 37 that had issued positive guidance, on average, for the quarter.
Analyst Sees Solid Q4 Earnings for Wells Fargo
Big banks will dominate the earnings calendar early on, and these lower earnings estimates are found throughout the industry.
“All the large banks show the upcoming fourth quarter as the lowest estimated revenue and EPS to date in 2021,” says CFRA Research analyst Kenneth Leon. “We are likely to see continued low-to-moderate credit risk to credit cards, commercial and industrial loans, commercial real estate and trading and counterparty losses.”
However, for Wells Fargo, which is slated to unveil its fourth-quarter results ahead of Friday’s open, Leon is confident the big bank will deliver a turnaround that will result in higher capital returns.
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“We think WFC should benefit from favorable industry trends, and management’s focus on execution has improved. While the pandemic remains uncertain, we expect Q4 2021 and 2022 to show improved loan activity and higher net interest income than the first half 2021.”
Leon also expects “a rebound in consumer loan demand, card activity, and higher loan balances, as well as personal and small business loans,” and points to Wells Fargo’s technological innovations, including its mobile, cloud-based consumer banking platform, as reasons to be upbeat toward the big bank.
He has a Buy rating on the financial stock and he’s certainly not alone. According to S&P Global Market Intelligence, 11 analysts say Wells Fargo is a Strong Buy and five call it a Buy. This compares to 11 Holds and not a single Sell or Strong Sell.
As for WFC’s fourth-quarter results, the Wall Street …….