The week of October 9 to 13 will mark the start of the earnings reporting season covering the third quarter of 2017. Most investors seem to have few worries that hurricanes and slower economic data are going to upset the corporate earnings picture. After all, the stock market keeps hitting higher and higher all-time highs each week. Back in the old days it was universally true that for the stock market to be doing well it meant that the banks and the financial sector had to be doing well. That makes sense on the surface — how great can the market be if those with the largest control of the markets aren’t doing well?
It turns out that many banks and financial firms have seen their price targets and expectations raised by analysts ahead of this earnings season. This is a classic play that older investors have seen many times, and what it means is that the banks and financials likely will have to post solid earnings. If not, their shares may have to give back some of those fresh gains.
What makes these target hikes even more demanding for the bank stocks is that many of the ratings are either reiterated Buy and Outperform ratings for the third or fourth time, and some of the ratings are also just at Neutral. There were even some analyst downgrades, despite price targets being hiked.
24/7 Wall St. has covered several of the key analyst calls made ahead of earnings. Some are robust target price hikes, and others seem more like maintenance calls ahead of time, so the analysts do not look like they are playing Monday morning quarterbacks.
Consensus analyst target data are from Thomson Reuters. Other color has been provided on each bank as well.
Bank of America Corp. (NYSE: BAC) was reiterated as Outperform and the price target was raised to $31 from $28 at Credit Suisse. That would generate 19% in total upside if the firm is correct on the price target and with the dividend included. Citigroup maintained its Neutral rating but raised its price target to $27 from $25. Bank of America’s consensus analyst target at Thomson Reuters is now $27.40, but that was $26.96 a month ago and $26.25 in July ahead of earnings. Its shares are up almost 19% so far in 2017.
Citigroup Inc. (NYSE: C) was maintained as Outperform at Credit Suisse, but the firm raised its target price to $83 from $73. That represents about 12% upside, if you include the dividend. Citigroup shares closed at $75.64 ahead of this call, in a 52-week trading range of $47.54 to $76.02 and with a consensus analyst target price of $74.27. The consensus analyst target price was $62.54 a month ago, and it was $66.24 back before the earnings release in July. Citigroup is up over 27% so far in 2017.
E*Trade Financial Corp. (NASDAQ: ETFC) was raised to Buy from Neutral and its price objective was raised to $49 from $44 (versus a $43.95 prior close) at Merrill Lynch. E*Trade shares were down over 2.3% on Friday but were last seen up 1.1% at $44.47 on Monday morning. The firm sees additional upside coming from more deposits onto the balance sheet, core growth, higher reinvestment rates, more margin upside, a decrease in E*Trade’s leverage ratio, the reinstatement of share repurchases and potentially lower tax rates. Just last week there were price target hikes from Deutsche Bank (to $49 from $47), Instinet (to $52 from $47) and Jefferies (to $46 from $43). The current consensus target price of $47.13 is up from $45.33 a month ago, and that target was all the way down at $41.23 in mid-July. The shares are up over 27% so far in 2017.
Goldman Sachs Group Inc. (NYSE: GS) was downgraded to Neutral from Outperform but the price target was raised to $255 from $240 at Credit Suisse, with the downgrade being based on valuation rather than fundamentals. Citigroup maintained its Neutral rating on Goldman Sachs, but it raised its target price to $250 from $225. Merrill Lynch has a Buy rating, but it raised its price objective to $275 from $260. Goldman Sachs has a 52-week range of $165.51 to $255.15 and a consensus target price of $239.76. Despite the target hikes and strength of the Dow and S&P 500, Goldman Sachs shares were last seen up less than 3% year to date, despite better performance of the last quarter and month.