Analysts are chiming in with bullish forecasts on Bank of America Corp (NYSE:BAC) after the banking giant posted a third-quarter earnings beat on Monday, October 17th. Confident on the company’s encouraging results, Jefferies raises EPS estimates on back of the outclass and FBR declares, “we remain buyers.” Yet, are BAC’s results as impressive as they seem? Let’s explore what the analysts are saying on the matter:
Jefferies analyst Ken Usdin reiterates a Buy rating on shares of BAC with a $19 price target, which represents a nearly 17% upside from where the stock is currently trading.
Upon looking at BAC’s third-quarter earnings wrap, Usdin observes efficiency progress, explaining, “Mgmt’s sub-65% efficiency target (without rates help) seems achievable in ’16 after inking another quarter of improvement.” Meanwhile, the analyst observes a rise in revenue “despite loan run-off and fee headwinds” and sees credit as “very good,” as consumers continue to release reserves.
Usdin notes, “BAC’s 3Q was highlighted by fee growth, expense control, and improving credit, as operating leverage progress continued. Fee revs. and credit run-rate better vs. our model,” and subsequently raises his 2017 EPS projections from $1.55 to $1.60 while maintaining his 2018 estimate at $1.80.
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, five-star analyst Ken Usdin is ranked #236 out of 4,180 analysts. Usdin has a 76% success rate and realizes 7.8% in his annual returns. When recommending BAC, Usdin yields 10.7% in average profits on the stock.
FBR analyst Paul Miller also remains bullish on the stock and therefore reiterates an Outperform rating on BAC with a price target of $20, which represents a 23% increase from where the shares last closed. Moreover, Miller increases his financial 2016 year operating EPS projection from $1.42 to $1.50 while maintaining his financial year of 2017 operating EPS estimate of $1.55.
However, the analyst though positive on the giant advises to take the strong performance with a grain of salt, adding that though the headline beat is favorable, it might not be “quite as strong as it looks.”
“While we were encouraged by the strong results, including lower provisions and stronger fee income than anticipated, we also believe the beat was not as impressive as it appears given the benefits from a change in accounting practices and a large write-up of BAC’s MSRs. When backing out the MSR write-up, we believe that ROATCE likely came in closer to 9.4% than the reported 10.3%, and we remain cautious on BAC’s ability to sustain ROEs at this level given the challenging rate environment and other industry headwinds, including tighter capital standards for GSIBs and potential regulatory implications from the Wells Fargo scandal. With that said, we continue to view shares of BAC as attractively valued,” Miller concludes.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, five-star analyst Paul Miller is ranked #331 out of 4,180 analysts. Miller has a 69% success rate and gains 8.1% in his yearly returns. However, when suggesting BAC, Miller faces a loss of 9.4% in average profits on the stock.
TipRanks analytics indicate BAC as a Strong Buy. Based on 19 analysts polled in the last 3 months, 15 rate a Buy on BAC, while 4 maintain a Hold. The 12-month price target stands at $17.74, marking a 9% upside from where the shares last closed.