Prepare For A Flood Of Bank Earnings

TheStreet.com

NEW YORK (TheStreet) -- I have been analyzing the publicly traded FDIC-insured financial institutions since early 2006. I began my studies a year earlier focusing on the housing market and home builder stocks. I correctly called the top for the builders in mid-2005, and then turned my attention to the community and regional banks. I began to warn about all banks in April 2006 and community banks began to fall like dominoes at the end of 2006 with the money center and regional banks crumbling beginning in February 2007.

Since the stock market bottom in March 2009 I have been dissecting the FDIC Quarterly Banking Profiles tracking the improvements in the banking system, but also warning that the Great Credit Crunch is not yet over.

A month ago I wrote, Big Banks Face Limited Upside, but when the PHLX KBW Banking Index held its 50-day simple moving average on June 24 bank stocks began a leadership run into this week. What's interesting is that bank stocks did not participate in Thursday's strong market where the Dow industrials, S&P 500 and Russell 2000 closed above my monthly pivots at 15,437, 1669.0 and 1030.75 respectively. In fact, 11 of the 12 bank stocks that I profiled today set multi-year highs between July 8 and July 11.

Remember that the banking index includes the four 'too big to fail' money center banks and that all 24 components of the index are rated hold. This makes next week's earnings from these 12 banks extremely important.

On July 8 I wrote, Bank Indices Set Multi-Year Highs Pre-Earnings and the banking index set at least an interim peak on July 9. Bank earnings must beat on EPS and revenue without cautious guidance.

The ValuEngine valuation warning intensified even more on Thursday with 75.0% of all stocks overvalued, 40.6% overvalued by 20% or more. The finance sector is 18.0% overvalued with a continued equal-weight asset allocation rating.

Reading the Table

OV/UN Valued: Stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.

VE Rating: A "1-engine" rating is a strong sell, a "2-engine" rating is a sell, a "3-engine" rating is a hold, a "4-engine" rating is a buy and a "5-engine" rating is a strong buy.

Last 12-Month Return (%): Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage.

Forecast 1-Year Return: Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months.

Value Level: Price at which to enter a GTC limit order to buy on weakness. The letters mean; W-weekly, M-monthly, Q-quarterly, S-semiannual and A-annual.

Pivot: A level between a value level and risky level that should be a magnet during the time frame noted.

Risky Level: Price at which to enter a GTC limit order to sell on strength.

Banks reporting pre-market on Wednesday:

Bank Of America ($13.51) set its multi-year high at $13.99 on May 31. My semiannual value level is $10.09 with a weekly pivot at $13.30 and monthly risky level at $14.66.

PNC Financial ($74.10) set a multi-year high at $76.79 on July 9 versus this week's pivot at $76.50. My monthly value level is $73.02 with a semiannual risky level at $83.98.

US Bancorp ($37.15) set a multi-year high at $37.46 on July 9. My monthly value level is $34.76 with a quarterly pivot at $38.25 and semiannual risky level at $40.03.

Banks reporting pre-market on Thursday:

BB&T ($34.58) set its multi-year high at $35.23 on July 9. My monthly value level is $33.34 with a quarterly risky level at $35.29.

Capital One ($65.81) set its multi-year high at $66.33 on July 8. My semiannual value level is $59.76 with a weekly pivot at $65.32 and semiannual risky level at $78.87.

City National ($64.11) set its multi-year high at $67.41 on July 9. My monthly value level is $63.04 with a weekly pivot at $67.61 and semiannual risky level at $70.16.

Fifth Third Bank ($18.81) set its multi-year high at $19.08 on July 11. My semiannual value level is $17.50 with a monthly pivot at $18.72 and semiannual risky level at $21.10.

Huntington Bancshares ($8.18) set a multi-year high at $8.66 on July 8. My monthly value level is $7.96 with a weekly pivot at $8.23 and semiannual risky level at $8.41.

KeyCorp ($11.57) set its multi-year high at $12.13 on July 8. My monthly value level is $11.15 with a semiannual pivot at $11.73.

Morgan Stanley ($25.55) set its multi-year high at $27.17 on June 10. My semiannual value level is $16.10 with a weekly pivot at $26.44 and monthly risky level at $27.13.

Banks reporting pre-market on July 19:

First Horizon ($11.86) set its multi-year high at $12.48 on July 8. My semiannual value level is $10.75 with a weekly pivot at $11.98.

Suntrust Banks ($33.34) set its multi-year high at $34.64 on June 9. My monthly value level is $31.63 with a weekly pivot at $34.13 and semiannual risky level at $35.18.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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