Before their budding recovery effort had a chance of taking hold, shares of Wells Fargo (WFC 0.42%) were upended today. As of 12:30 p.m. ET Tuesday, in fact, this bank's stock is down 5%, seemingly moving back toward the multi-month low made in mid-March.
The culprit? Its first-quarter numbers. Although revenue and profits were both up year over year, several of the bank's other fiscal metrics fell short of expectations.
Disappointing quarterly numbers
Mega-bank Wells Fargo turned revenue of more than $21.4 billion into net income of nearly $5.3 billion for the three months ending in March, up from year-earlier comparisons of $20.1 billion and $4.9 billion (respectively). And, per-share earnings improved from $1.39 to $1.60. Net interest income improved from $11.5 billion to $12.1 billion as well.
Image source: Getty Images.
The company's top line, however, also fell short of analysts' estimates of nearly $21.8 billion, while net interest income -- arguably the most-watched metric for this past quarter -- missed expectations of $12.3 billion. Investment banking fees, expenses, and the credit quality of its loan portfolio each also disappointed, even if only slightly.
In the aggregate, investors simply saw too many red flags.
Opportunity knocks
The market's bearish knee-jerk reaction is understandable. Investors were expecting more following last year's removal of a regulatory cap on the bank's total assets. Wells Fargo is indeed getting bigger, but not necessarily getting better. Even if much of the blame for today's disappointment goes to the unexpectedly difficult economic backdrop, it's disappointing nonetheless.
NYSE: WFC
Key Data Points
Tuesday's stumble, however, is still more of an opportunity to step into the stock than an omen of what to expect for the foreseeable future. Analysts' expectations were arguably unfairly high given the current environment. The analyst community is apt to adjust its future expectations accordingly.
In the meantime, don't look past the simple fact that Wells Fargo still produced solid sales and earnings growth during Q1 ... growth that's likely to at least meet adjusted expectations going forward. The stock's forward-looking dividend yield of 2.3% isn't too shabby either.
