What to Look For in Wells Fargo’s Q3 Report

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Wells Fargo & Co. (NYSE: WFC) is set to release its third-quarter financial results before the markets open on Friday. The consensus estimates from Thomson Reuters are calling for $1.17 in earnings per share (EPS) and revenue of $21.9 billion. In the same period of last year, the big bank said it had EPS of $0.84 on $21.93 billion in revenue.

This bank has tried to recover from the revelation last year that bank employees created additional customer accounts without the knowledge of those customers. More recently it announced a plan to reduce its headcount by some 26,000 over the next three years and suspended two executives related to an investigation into the bank’s purchase of low-income housing tax credits.

The last thing Wells Fargo needs is a slowdown in the U.S. mortgage market, but that may be its next challenge. Of the nation’s five largest banks, Wells Fargo is the largest residential mortgage lender and the largest commercial real estate lender.

When the Federal Reserve announced a 2% increase in its federal funds rate to 2.0% to 2.5% in September, shares of the nation’s big banks all closed lower. Rising Fed interest rates will send mortgage rates higher, shutting some potential home buyers out of the market and reducing Wells Fargo’s biggest business.

Overall, Wells Fargo has underperformed the broad markets, with the stock down about 6% in the past 52 weeks. In just 2018 alone, the stock is down over 13%.

A few analysts weighed in on Wells Fargo ahead of the report:

  • UBS has a Buy rating and a $63 price target.
  • Wolfe Research has an Outperform rating.
  • Macquarie has a Neutral rating with a $62 target.
  • Edward Jones has a Buy rating.
  • Morgan Stanley has an Equal Weight rating and a $61 price target.
  • Keefe Bruyette & Woods has an Outperform rating with a $63 target.

Shares of Wells Fargo were last seen at $52.25, with a consensus analyst price target of $62.20 and a 52-week trading range of $50.26 to $66.31.