WFC: Wells Fargo Struggling in Bullish Banking Sector

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WFC: Wells Fargo Struggling in Bullish Banking Sector

Wells Fargo & Co. (NYSE: WFC) is a bank holding company that provides diversified financial services. The company was founded by Henry Wells and William G. Fargo in 1852 and is headquartered in San Francisco, California USA.

The company has three operating segments: wholesale banking, community banking, and wealth and investment management.  On the whole, investors have been strongly bullish on banking stocks but over the last few weeks WFC has struggled on a relative basis and this has led many to consider shorting the still while it is still at elevated levels.

Recent Stocks News

In a recent development, Wells Fargo elected Karen Peetz and Ronald Sargent as new independent directors, and this has led many to speculate that we will start to see some significant differences in the managerial direction for the company.  WFC also appointed Jafar Amin as regional president for the Asia-Pacific region and Richard Yorke as chief operating officer for the wholesale banking group.

The company’s total bank branch interactions for the month January were down 12% from December, while new consumer checking account openings were up 31% in January from the same time last year. On January 13th, the company released statements saying that its efficiency initiatives are expected to reduce expenses by about $2 billion annually by year-end 2018.

On December 21st, the Financial Industry Regulatory Authority (FINRA) fined Wells Fargo Securities, LLC and Wells Fargo Prime Services, LLC jointly totaling $4 million for failing to protect records from alteration.

WFC: Corporate Earnings Results

WFC reported fourth quarter earnings-per-share at $0.959. Its net revenue for the quarter was $21.582 billion versus $22.451 billion expected by analysts. On average, analysts on Reuters are expecting $4.19 per-share earnings for the full-year ending 2017 and full-year revenues of $91.873 billion.  The company’s outlook called for per-share earnings of $4.60 and revenues of $96.292 billion for the year 2018.  Most stocks in the sector rose during the period, as forex trade shows the US Dollar moving higher and stocks surging to new record highs.

The stock is trading around $58 near the highest level during past one year. Its trailing twelve-month earnings per share is $3.99 at current price its price to earnings ratio is 14.56x while the industry average is 16.44x. Its forward price to earnings ratio comes at 13.8x given that the expected earnings per share for the year 2017 is $4.19. The company is regular dividend payer. It paying a quarterly dividend of $0.38 that yield is 2.62%. Its little better than the industry average of 2.16% as per Reuters.

WFC gives 13.04% annualized return on equity in last 5 year while the industry average is 21.34% during the same period; source Reuters. Similarly, it gives 1.37% annualized return on assets during the last five years compared to industry average of 2.67%. Sales have a growth rate of 1.66% annualized in last 5 years despite the industry growth rate of 15.13% during the same period. The analysts are advising to hold sock, as per Reuters consensus recommendation.

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