360-Degree BofA Earnings Preview (BAC, JPM, C, WFC)

Bank of America Corporation (NYSE: BAC), the second of the DJIA components in banking, is due to report its fourth quarter and 2011 year-end earnings on Thursday morning.  The bank is currently the most unpopular out of all of the big ‘too big to fail’ money-center banks in America.

What is so interesting about this coming earnings report is that Bank of America is the top performer of all 30 DJIA stocks so far in 2012.  After a 3% gain to $6.70 on Wednesday, BofA is up 20.5% since the end of 2011 during what is only 11 trading sessions so far this year.  At $6.70, the 52-week trading range is $4.92 to $14.95.

Thomson Reuters has shown a total flip-flop on earnings expectations.  The current estimate is $0.15 EPS but that may change even between now and tomorrow morning’s report.  The prior estimate was $0.23 and that had actually been on the rise.  The earnings have been adjusted due to what has been reported by J.P. Morgan Chase & Co. (NYSE: JPM), Citigroup Inc. (NYSE: C), and Wells Fargo & Co. (NYSE: WFC).  The Thomson Reuters consensus estimate has so far remained static at about $24.08 billion in revenues.

Read Also: Bank of America, One of the Five Cheapest DJIA Stocks for 2012

The huge discount to book value is again likely to be immaterial as Citi and J.P. Morgan both trade at discounts to book value even if Wells Fargo is at a premium to its book value.  The bank needs to show that credit metrics of its customers have continued to improve.

Options pricing is harder to use on low-priced stocks so we are not going to use a price expectation “pricing in” value for the bank.  The Bank of America stock chart shows that the bank is well ave its 50-day moving average of $5.79 but still very far under the 200-day moving average of $8.49.

JON C. OGG