On Thursday, Wells Fargo (NYSE:WFC) maintained its Overweight rating on Bank of America (NYSE:BAC) shares and increased the price target to $44 from the previous $40. The adjustment comes with a positive outlook on the bank's first-quarter performance and expectations for the year ahead.
The Wells Fargo analyst anticipates a slight rise in Bank of America's first-quarter 2024 earnings per share (EPS), attributing the increase to stronger-than-expected capital markets activity. This improvement is believed to be slightly offset by an estimated Federal Deposit Insurance Corporation (FDIC) charge.
Despite challenges with net interest income (NII), a mid-year turnaround is projected, along with strong credit and expense management. These factors are expected to sustain a return on tangible common equity (ROTCE) of around 13% for the year 2024.
The revised EPS forecast for the first quarter of 2024 is now set at $0.74, a one-cent increase from previous estimates. The full-year 2024 EPS estimate has also been raised by five cents to $3.15, reflecting better-than-anticipated investment banking and trading results, though this is largely balanced by the estimated FDIC special assessment for the first quarter.
The analyst's EPS estimates for the years 2025 and 2026 remain unchanged at $3.55 and $3.95, respectively. The new price target of $44 is based on updated estimates and book values in the analyst's valuation models. This target suggests a 1.7 times multiple on the estimated tangible book value (TBV) of $26 per share at the end of the fourth quarter of 2024.
InvestingPro Insights
The recent analysis by Wells Fargo on Bank of America (BAC) is bolstered by several key metrics and insights from InvestingPro. With a market capitalization of $298.35B and a Price to Earnings (P/E) ratio of 12.0 for the last twelve months as of Q4 2023, Bank of America stands as a significant entity in the banking sector. The company's commitment to shareholder returns is evident from its history of raising dividends for 54 consecutive years, including a 9.09% dividend growth in the last twelve months. While the bank has faced challenges with gross profit margins, it has experienced a substantial price uptick of 39.26% over the last six months, trading near its 52-week high, which underscores investor confidence in its performance.
InvestingPro Tips highlight Bank of America's prominence in the Banks industry and the analysts' predictions that the company will remain profitable this year, having already been profitable over the last twelve months. For readers looking to delve deeper into Bank of America's financial health and performance, there are additional InvestingPro Tips available, which can be accessed through the company's profile on Investing.com. For those interested in a subscription, use the coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, providing even more valuable insights to inform investment decisions.
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