Earnings preview: Wall St to measure Wells Fargo’s confidence in Q4

Amidst escalating geo-economic tensions, Wells Fargo (WFC) is scheduled to report fourth quarter results on Tuesday, January 15. The Wall Street will primarily be measuring the confidence of the biggest US mortgage lender through the Q4 financials, after years of being embroiled in numerous scandals.

Do not expect any big jumps in the results; in fact, most investors would be happy to see slight improvements from the prior sequential quarter. Analysts, on an average, expect revenue to decline 2.3% to $21.42 billion. Meanwhile, quarterly earnings are expected to grow to $1.17 per share from 97 cents per share a year ago.

The bottom-line would be helped by the bank’s cost cutting initiatives, which include a 5% job cut it announced in September. The layoffs will be carried out in a span of three years.

On an operational level also, Wells Fargo has been performing relatively well recently. The company has managed to grow its customer accounts on a consistent basis, which in turn has helped in boosting lending activities. The management will have a lot to say regarding the same at the conference call. Investor confidence in the stock would highly depend on the operational guidance given during the call.

Last month, Wells Fargo reached an agreement with the attorney generals from all 50 US states and the District of Columbia on issues related to its sales practices and mortgage interest rates. The agreement includes the payment of $575 million to resolve claims made by the state attorneys general on these issues.

This comes as a major breather to WFC investors, who can now merit the company based on its operational performance. With a dividend yield of 3.78%, WFC is a difficult stock to ignore.

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The stock has fallen 23% in what has turned out to be a tumultuous year. If the results are strong, it would present a good buying opportunity to investors.  WFC has 8 Buy ratings and 6 Hold ratings. It has an average 12-month price target of $58.8, representing a 22% upside.

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