Wells Fargo (WFC) Looks to Clip Short Sellers With Q3 Report

October 20, 2009 2:50 PM EDT

On the eve of its anticipated third quarter earnings report, Wells Fargo & Co. (NYSE: WFC) shares are trading higher, up $0.26 to $30.33. Wells Fargo is scheduled to release their earnings before the market opens tomorrow.

Analysts currently expect Wells to report quarterly Q3 EPS $0.36 on revenues of $21.63 billion. For their Q209 release, Wells reported EPS of $0.57, trumping the Street estimates of $0.34, on $22.51 billion in revenue.

Looking back a year, to Q308, Wells Fargo EPS was $0.49 versus estimates of $0.41, and revenues were $10.38 billion versus the consensus of $10.96 billion. That quarter saw net charge-offs of $1.995 billion in the wake of the 2008 mortgage mess.

Wells Fargo shares are trading about 19.65% higher since their Q209 results.

Data from Bloomberg shows that 12 analysts have Buy, 12 have Holds, and 6 have a Sell rating on the stock. Wells Fargo analysts have an average price target of $29.16. The 'street high' estimate is $44 for the stock, and $20 is the low estimate from the 30 analysts covering WFC.

On 10/19/09, Jim Cramer said that he was hedging financial stocks such as WFC. He said that banks are still wrestling with rising foreclosures and a limp housing market. As of yesterday, he said that he owns Wells in his charitable trust.

In early October, Goldman Sachs upgraded Wells Fargo from Neutral to Buy, and also raised their price target from $31 to $35. The raise comes from Goldman's stance on Wells' change in tangible assets per share. They say Wells Fargo has increased tangible assets per share 70% this cycle given the low price paid for Wachovia while pre-provision per asset has also increased 9%. They said this implies the stock is trading at just 6X normalized EPS. Goldman also upgraded their stance on large cap U.S. Banks as a whole.

Collins Stewart also initiated coverage on Wells Fargo in September, placing a Hold rating and a price target of $33. Collins believes that, while profitability may remain elusive, Q3 earnings "will center on management commentary surrounding loan loss reserves, including greater conviction that reserve build will end near-term. For the industry, 3Q09 earnings are expected to fall about 50-70% year-over-year. Credit uncertainty, together with the debate over the shape of the economic recovery, will likely keep valuations under pressure."

In September, an analyst at Sanford Bernstein has upgraded shares of Wells Fargo from Market Perform to Outperform, also raising his price target from $31 to $40.

On the other hand, a few days after Goldman's report, UBS labeled the large, regional banks with a cautious rating. UBS started Wells Fargo at a Sell rating.

Atlantic Equities upgraded Wells Fargo from Underweight to Neutral in late September.

Wells Fargo & Co. will issue its Q309 results via press release at approximately 8:00 AM (EDT) on October 21, 2009. Stay tuned to StreetInsider.com's Earnings section to see our analysis of the highly-anticipated quarterly results within seconds of their release.

Related Categories

Insiders' Blog
Trader Talk

Stocks Mentioned

Related Entities

• Jim Cramer
• UBS
• Wachovia
• Sanford C. Bernstein
• Collins Stewart

Add Your Comment

Name

Subject

Body

Verification can't see the text?
click here to refresh the image.
what's this?