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Bank of America (BAC) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research
·3 mins read

Bank of America (BAC) closed at $24.09 in the latest trading session, marking a +1.35% move from the prior day. This move outpaced the S&P 500's daily gain of 0.83%. At the same time, the Dow added 1.2%, and the tech-heavy Nasdaq gained 0.74%.

Heading into today, shares of the nation's second-largest bank had lost 7.55% over the past month, lagging the Finance sector's loss of 5.55% and the S&P 500's loss of 4.83% in that time.

Investors will be hoping for strength from BAC as it approaches its next earnings release, which is expected to be October 14, 2020. On that day, BAC is projected to report earnings of $0.42 per share, which would represent a year-over-year decline of 25%. Meanwhile, our latest consensus estimate is calling for revenue of $20.61 billion, down 9.65% from the prior-year quarter.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $1.61 per share and revenue of $86.17 billion. These totals would mark changes of -41.45% and -5.56%, respectively, from last year.

Investors should also note any recent changes to analyst estimates for BAC. These revisions typically reflect the latest short-term business trends, which can change frequently. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 0.37% higher. BAC is holding a Zacks Rank of #3 (Hold) right now.

In terms of valuation, BAC is currently trading at a Forward P/E ratio of 14.73. Its industry sports an average Forward P/E of 13.3, so we one might conclude that BAC is trading at a premium comparatively.

We can also see that BAC currently has a PEG ratio of 2.1. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. The Banks - Major Regional was holding an average PEG ratio of 2.1 at yesterday's closing price.

The Banks - Major Regional industry is part of the Finance sector. This group has a Zacks Industry Rank of 192, putting it in the bottom 25% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.


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Zacks Investment Research