Bank of America: BAC Pullback Is Not a Buying Opportunity

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U.S. financial giant Bank of America (BAC) just announced Q3 results, including a loss of $70 million to shareholders.

Bank of America earnings bac stockBAC shares are down on the news, but could today’s pullback be a buying opportunity or a big red flag to stay away?

Company Overview

Headquartered in Charlotte, North Carolina, Bank of America is the second largest bank in the U.S. Bank of America’s claim to fame is that it has a working relationship with nearly every single Fortune 500 company (99%) and operates 5,600 branches across 150 countries (and about three times that number of ATMs).

Earnings Rundown

For the third quarter, Bank of America reported a loss of $70 million, or 1 cent per share, on $21.21 billion in total revenue. This time last year, Bank of America had reported a net profit of $2.22 billion, or 20 cents per share, on $21.53 billion in revenue. What weighed on Bank of America’s bottom line was a $10.65 billion settlement with the Department of Justice related to Bank of America’s mortgage-backed bonds business leading up to the financial crisis.

Even so, Bank of America’s Q3 2014 bottom-line results still topped analyst projections for a loss of 9 cents per share. Bank of America’s Q3 top line missed the $21.36 billion estimate by a hair, which was a mediocre earnings report. So, BAC shares pulled back following the announcement.

Current Ratings

Over the past year this conservative-ranked stock has been fluctuating between “buy,” “hold” and “sell” territory. That’s mostly due to changes in buying pressure, which indicates BAC stock’s risk-to-return ratio. Currently, BAC earns a “B” for its Quantitative Grade (indicating decent buying pressure). However, what keeps BAC stock at a “hold” is its “D-rated” Fundamental Grade.

Of the eight fundamental metrics I graded Bank of America on, it failed on five: Sales growth (F), earnings momentum (F), earnings surprises (F), analyst earnings revisions (F) and earnings growth (D). BAC also squeaked by with return on equity (C) and earned decent grades on operating margin growth (B) and cash flow (B).

As of this posting, Oct. 15, I consider BAC a “C-rated hold.” I wouldn’t add new money to BAC at this time.

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Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip GrowthEmerging GrowthUltimate GrowthFamily Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.


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