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How Often Does Wells Fargo Beat Earnings Estimates?

By John Maxfield – Jul 7, 2016 at 7:40AM

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All the time.


One Wells Fargo Center in Charlotte, North Carolina. Image source: iStock/Thinkstock.

Second-quarter earnings season is upon us, with the nation's banks set to begin reporting results next week for the three months ended June 30. How will they perform?

Not well, say analysts. All four of the nation's biggest banks are expected to make less money in the second quarter of this year than they did in the same period in 2015. The saving grace for Wells Fargo (WFC -0.97%) is that it's expected to do less poorly than its megabanking peers.

Bank

Expected EPS-2Q16

Actual EPS-2Q15

Expected Change

JPMorgan Chase

$1.44

$1.54

-6.5%

Bank of America

$0.36

$0.45

-20%

Wells Fargo

$1.01

$1.03

-1.9%

Citigroup

$1.15

$1.51

-23.8%

Data source: Yahoo! Finance.

Analysts expect Wells Fargo to earn $1.01 per share in the second quarter. That's almost 2% less than the $1.03 it earned in the year-ago period. While that's disappointing, however, it's certainly not as disappointing as the 20% or more declines that analysts are predicting from Bank of America and Citigroup.

The difference in expectations probably has something to do with Bank of America and Citigroup's capital markets businesses -- that is, trading and investment banking units. Wells Fargo is building an investment bank, but it still has a long way to go before its Wall Street operations matches up to these two rivals.

Additionally, at least in Bank of America's case, its earnings may have been negatively impacted during the quarter by a $415 million settlement with the SEC to resolve accusations that it misused customer cash and securities to generate profits. I say "may have been impacted" because the North Carolina-based bank could have previously set aside money to cover the claim, in which case that expense would have already been realized.

Either way, whenever one talks about earnings estimates, it's good to keep in mind that they are just that: estimates. It thereby helps to know how a specific bank -- in this case, Wells Fargo -- has tended to match up to analyst estimates in prior quarters.

The answer in Wells Fargo's case is: very well. In the 21 quarters since the beginning of 2011, the California-based bank has met or beaten expectations every quarter -- meeting four times and beating 17 times.


Data source: Streetinsider.com. Chart by author.

In a plurality of quarters it's beaten earnings-per-share estimates by $0.01, with its best performance exceeding estimates by $0.08 per share. Its average "beat" over this stretch comes out to $0.02 per share.

Thus, at least in Wells Fargo's case, it seems just as likely as not that it could end up matching its earnings per share from the same quarter last year. This remains to be seen, of course, but either way we'll find out for sure when Wells Fargo reports earnings on July 15.

John Maxfield owns shares of Bank of America and Wells Fargo. The Motley Fool owns shares of and recommends Wells Fargo. The Motley Fool recommends Bank of America. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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