What to Watch in Wells Fargo’s Q1 Report

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Wells Fargo & Co. (NYSE: WFC) is set to report its first-quarter financial results before the markets open on Friday. The consensus estimates are calling for $1.10 in earnings per share (EPS) and $20.99 billion in revenue. In the same period of last year, the bank said it had $0.96 in EPS and $21.93 billion in revenue.

When companies go afoul of regulators and when they have taken a serious reputational hit, sometimes they make bad reactionary decisions. News broke recently that Wells Fargo has entered into an agreement to sell its Institutional Retirement & Trust (IRT) business to Principal Financial Group. Whether investors will see this as a great buy or as a bad sale may depend on multiple factors that are not yet fully known.

Wells Fargo’s IRT unit includes its retirement plan record-keeping and administrative services for 401(k) and pension plans, as well as its nonqualified executive deferred compensation, institutional trust and custody and institutional asset advisory businesses.

The transaction will create one of the largest retirement providers in the industry, which Principal Financial called a top-three defined contribution record keeper. As of December 31, 2018, the Wells Fargo division had $827 billion in assets under administration and served 3.9 million 401(k) participants and pensioners with roughly 2,500 employees.

Overall Wells Fargo has underperformed the broad markets, with its stock up about 3.7% year to date. In the past 52 weeks, the stock is actually down 9%.

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

  • Keefe Bruyette & Woods has a Market Perform rating and a $50 price target.
  • Deutsche Bank has a Hold rating with a $54 price target.
  • Raymond James has a Market Perform rating.
  • Credit Suisse has a Hold rating.
  • Wolfe Research has a Market Perform rating.

Shares of Wells Fargo were last seen at $47.78, in a 52-week range of $43.02 to $59.53. The consensus price target is $56.60.


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