Shares of Wells Fargo WFC slipped marginally during regular trading hours Thursday, just one day before the embattled baking giant releases its latest quarterly financial results. Investors seemed just a little hesitant ahead of the report, but WFC is still a stock to pay close attention to once the results are in.
In theory, rising short-term interest rates should be lifting big banking stocks. However, with the yield curve flattening as investors worry about the current long-term macroeconomic growth outlook, there is a general sense of uncertainty around the industry. This could mean that big-name banks like Wells Fargo will need to blow away investors in order to regain some momentum.
Now let’s take a look at what investors should expect from Wells Fargo’s Q2 earnings report. Our latest Zacks Consensus Estimates are calling for the company to report revenue of $21.57 billion, which would mark a roughly 2.7% dip from the year-ago period. At the other end of the income statement, Wells Fargo is expected to see its adjusted earnings climb by 4.7% to hit $1.12 per share.
Meanwhile, investors should also note that WFC’s quarterly earnings revisions activity has been mixed recently. The company has earned one upward earnings estimate revision within the last seven days, against two downward changes. Furthermore, the Zacks Consensus Estimate has fallen by three cents within the last 90 days. Wells Fargo’s mixed revision activity has helped contribute to its Zacks Rank #3 (Hold).
Moving onto WFC’s stock price performance, investors might be pleased to note that shares of Wells Fargo have surged roughly 9.9% over the last three months, which tops the S&P 500’s 4.8% climb. More recently, shares of WFC have cooled off a bit, up around 1.4% over the last four weeks.
With all that said, a solid earnings beat might be exactly the jolt Wells Fargo needs. And to gauge how likely the bank is to outperform estimates tomorrow morning, we can turn to our exclusive Earnings ESP figure.
Zacks Earnings ESP (Expected Surprise Prediction) compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change.
This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.
Wells Fargo currently sports an Earnings ESP of -0.12% and a Zacks Rank #3 (Hold), which means our model is inconclusive about if Wells Fargo might top estimates when it reports its Q2 results before the opening bell on Friday. Investors should note that the bank has topped or matched earnings estimates in five out of the last six quarters.
Make sure to check back here for our full analysis once Wells Fargo reports!
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