Given the gradual economic improvement, stimulus paymentsand resumption of businesses, it seems to be a wise idea to add Wells Fargo & Company WFC stock to your portfolio now. The company’s strong fundamentals and solid prospects make it well-positioned for growth, driven by the consistent rise in deposit balances, and its efforts to cut down on expenses.
Moreover, the stock has been witnessing upward earnings estimate revisions of late, reflecting that analysts are optimistic regarding its growth potential. Over the past 60 days, the Zacks Consensus Estimate for its current-year earnings has moved 43.1% upward. Its 2022 earnings estimates have witnessed a 7.8% upward revision over the same period.
Thus, the company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Looking at its price performance, shares of Wells Fargo have rallied 75.6% over the past six months compared with the industry’s growth of 45.6%.
Mentioned below are the other factors that make the company a solid bet now.
Prudent Cost Management: Wells Fargo’s cost savings initiatives support its financials. Expenses witnessed a negative CAGR of nearly 1% over the last four years (ended 2020). It is focused on reducing its expense base to $53 billion in 2021 by building a more efficient company with a streamlined organizational structure, closing branches (targets to close 250 branches in 2021) and reducing headcount by optimizing operations and other back-office teams. Such efforts are likely to support its bottom-line growth.
Strong Balance Sheet: As of Mar 31, 2021, the company had debt level of $242.2 billion, which witnessed a decline over the past few quarters. Further, cash and cash equivalents were $286.7 billion as of the same date. Thus, given its decent liquidity profile, we believe Wells Fargo is less likely to default on its interest and debt repayments, if the economic situation worsens.
Improving Credit Quality: Wells Fargo’s credit quality is normalizing. This trend is expected to continue, thereby providing room to drive future earnings. Notably, net charge-offs remained near a low level of 24 basis points (bps) as a percentage of average loans (annualized) as of Mar 31, 2021, exhibiting the benefit of a diversified loan portfolio. Thus, with gradual recovery of the economy, credit quality is expected to improve in the quarters ahead.
Other Key Picks
JPMorgan Chase JPM has witnessed a 22.1% upward estimate revision over the past 60 days. The company’s shares have rallied 26.7% so far this year. It carries a Zacks Rank #2 (Buy) at present.
KeyCorp’s KEY shares have gained 39.5% so far this year. Further, the company’s earnings estimates for the ongoing year have moved 16.8% north in the past 60 days. It currently has a Zacks Rank of 2.
UMB Financial Corporation UMBF has witnessed 26.2% upward estimates revision for the current-year over the past 60 days. Shares of this Zacks #2 Ranked stock have gained 40.9% so far this year.
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