In recent times, Bank of America (BAC) has become a hot topic on Zacks.com's list of the most searched stocks, prompting us to take a closer look at the key factors that could shape the stock's future performance.
Recent Trends and Comparative Analysis
Over the past month, shares of the nation's second-largest bank have seen a return of -4.4%, contrasting with the Zacks S&P 500 composite's +0.9% change. Within the same period, the Zacks Banks - Major Regional industry, where Bank of America falls, has experienced a 1.9% decline. The burning question is: What lies ahead for the stock?
Revisions to Earnings Estimates
While media releases and rumors can cause temporary trends, at Zacks, we place a significant emphasis on fundamental facts. Our focus is primarily on evaluating changes in a company's earnings projection. We believe that a stock's fair value is intricately tied to the present value of its future earnings.
Our attention is directed towards how sell-side analysts covering the stock are revising their earnings estimates to adapt to the latest business trends. If earnings estimates increase, the fair value of the stock rises, generating interest from investors and driving the stock's price higher. This correlation between trends in earnings estimate revisions and near-term stock price movements is well-supported by empirical research.
For the current quarter, Bank of America is expected to post earnings of $0.79 per share, reflecting a year-over-year change of -16%. Over the last 30 days, the Zacks Consensus Estimate has seen a modest change of +0.3%.
The consensus earnings estimate of $3.20 for the current fiscal year indicates a year-over-year change of -6.4%, with a -1.3% change over the last 30 days. Looking into the next fiscal year, the consensus estimate of $3.39 suggests a positive change of +5.9%, with a recent change of +1%.
Considering the recent substantial change in the consensus estimate size, coupled with three other factors related to earnings estimates, Bank of America is currently rated Zacks Rank #3 (Hold).
Projected Revenue Growth
Earnings growth is crucial, but a company's ability to increase its revenues is equally vital. In the case of Bank of America, the consensus sales estimate for the current quarter indicates a year-over-year change of -2.6%. The estimates for the current and next fiscal years stand at $100.84 billion (+2.3%) and $102.4 billion (+1.6%), respectively.
Last Reported Results and Surprise History
In the last reported quarter, Bank of America reported revenues of $21.96 billion, reflecting a year-over-year change of -10.5%. The EPS of $0.70 for the same period compares to $0.85 a year ago. While the reported revenues were -8.79% below the Zacks Consensus Estimate of $24.07 billion, the EPS surprise was +1.45%.
Bank of America surpassed consensus EPS estimates in each of the trailing four quarters and exceeded consensus revenue estimates three times over this period.
Valuation
Considering a stock's valuation is vital for efficient investment decisions. Bank of America is graded C on the Zacks Value Style Score, indicating it is trading at par with its peers. A closer look at various valuation metrics helps determine whether the stock is overvalued, undervalued, or fairly priced.
Conclusion
Analyzing the facts discussed here, along with additional information on Zacks.com, can assist investors in making informed decisions about Bank of America. While the Zacks Rank #3 suggests performance in line with the broader market in the near term, the stock's future trajectory will be influenced by ongoing market dynamics. For the latest recommendations from Zacks Investment Research, you can download "7 Best Stocks for the Next 30 Days" today.
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