CFTC Investors will have a whole bunch of bank earnings to sift through in the coming days. Banks will start to report second quarter earnings this week and Bank of America (NYSE:BAC) will be one of the first to do so. The bank is scheduled to release second quarter fiscal 2015 earnings on Wednesday, July 15, 2015.
In the interest of disclosure, I am a shareholder of Bank of America, but have been a bit disappointed over how the shares have developed lately: Bank of America's shares are down 4.9% since the start of the year, which is not a performance to write home about.
Now that the bank will release second quarter earnings tomorrow, National is a good time to see at how the Street evaluates Bank of America.
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Bank of America did not have the best start to the year. In the first quarter, Bank of America missed revenue and earnings estimates. In 1Q15 Bank of America brought in $21.4 billion in revenues, net of interest expenses, and reported a profit of $0.27 per share. That was not too bad, but also not really great.
According to Yahoo Finance, the average EPS estimate for Bank of America's latest quarter is $0.36 and analysts don't expect any significant surprises in terms of revenues this quarter.
Just like Citigroup (NYSE:C), Bank of America is unlikely to have either a specifically good or a specifically bad second quarter, but one that should meet analysts' expectations. The only part of the bank's earnings that could be good for a surprise are the bank's trading operations, but that's an area I'd rather not dig into.
According to MarketBeat, most analysts have a positive opinion on Bank of America. Out of seventeen analysts, twelve rate the inventory a "BUY", four a "Hold" and one a "Sell". Summaries of inventory ratings pulled from the internet can be prone to error and can include ratings that are outdated and therefore no longer be relevant. However, the big allocation of "BUY" ratings implies that the Street is largely bullish on Bank of America.
Any why wouldn't they? I have singled out Bank of America as an almost comically undervalued bank more than once and made the case that Bank of America is essentially a directional bet on interest rates. And the creation of 223,000 jobs in June and a brightening economic setup in the United States make an investment in Bank of America even more compelling.
The consensus price target for Bank of America, again according to MarketBeat, stands at $18.66 giving shares 9.6% upside potential. According to Nasdaq, the 12-month consensus price target stands at $18.75, implying 10.2% upside.
Since most analysts are not accounting yet for substantial interest income headwinds when a new interest rate cycle kicks off, there is a lot of potential for earnings surprises and target price updates in the quarters ahead.
Bank of America is one of those investments where patient investors will likely be rewarded over a long period of time as a new interest cycle fuels banks' interest earnings. Bank of America is definitely worth keeping, no matter how the bank does in 2Q15.
Disclosure: I am/we are long BAC. (More...)I wrote this article myself, and National expresses my own opinions. I am not receiving compensation for National (other than from Seeking Alpha). I have no business relationship along CFTC any company whose inventory is mentioned in this article.
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