Stocks overall have been strong since the election of President Donald Trump, but no sector has fared better than financials. As Business Insider recently reported, bank stocks have surged 32% since the election, thanks to tailwinds like rising interest rates and the potential for decreased regulation.
Earnings for the sector are also about to get underway, and financial companies are expected to post over 7% growth for the quarter — better than every sector in the S&P 500, save two.
And yet, bank stocks sport a disproportionately low number of “buy” ratings from analysts, BI noted. Meanwhile, all three bank stocks we’ll be looking at today have seen earnings estimates shrink in recent months and are expected to post no sales growth.
If you’re planning on trading bank stocks before and after earnings, here’s what to expect.
Bank Stock Earnings: Citigroup (C)
Citigroup Inc (NYSE:C) stock has gained 16% so far this year and has posted earnings beats in each of the past four quarters. Despite the growth on tap for the sector, though, Citigroup’s earnings for the previous three months are expected to contract by just over 1%, while sales growth is expected to shrink by just slightly less.
Still, Citigroup is expected to post nearly 10% growth for the full year and over 13% next year, with the long-term average leveling out to just shy of double-digit growth.
Citigroup has also been working to keep investors happy even in the wake of the coming earnings slide. In late June, the company announced plans to repurchase nearly $16 billion of common stock next year, on top of doubling its dividend (which it’s only been paying for a year) to 32 cents per share.
At current prices, that doubles the yield to 1.8% — which, in my opinion, is more than enough to keep investors happy regardless of earnings numbers.
Bank Stock Earnings: JPMorgan Chase (JPM)
JPMorgan Chase & Co. (NYSE:JPM) is expected to post earnings of $1.60 per share for the most recent quarter, good for year-over-year growth of just greater than 3%.
That might not sound very impressive, but JPM stock’s performance still has quite the awe factor. Over the past year, shares have grown by over 50%, nearly four times better than the broader market.
Guggenheim recently upgraded JPM from “neutral” to “buy,” too, while JPM stock boasts a yield north of 2% despite the stock’s growth. Toss in four straight earnings beats, and this stock has all the momentum you could dream of heading into earnings.
Bank Stock Earnings: Wells Fargo (WFC)
Wells Fargo & Co (NYSE:WFC) is the worst performer in this group, hitting a high in March before reversing direction, bottoming in early June, then recovering 8% in the past month. Wells Fargo is the only stock in this group that’s missed earnings over the past year — coming up around 4% short in December.
For the most recent three-month period, Wells Fargo is expected to earn $1.01, just as it did a year ago, but four pennies less than the consensus three months ago. WFC enjoyed two upgrades a couple months back, but only one was to an “outperform” rating. WFC stock yields 2.7% thanks to the recent weakness, and has paid a dividend for about a year.
With shares about $3 away from their 52-week high, even a positive earnings report could actually lead to some investors taking their regained losses and heading for the door. But all in all, the financial sector looks solid and investors will likely keep buying in as company’s report their most recent results.
Hilary Kramer is the editor of GameChangers, Breakout Stocks, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.