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Wells Fargo (WFC) Rises 32.4% YTD: What's Driving the Stock?
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Shares of Wells Fargo & Company (WFC - Free Report) have rallied 32.4% year to date compared with the S&P 500 and the industry’s growth of 5.4% and 23.7%, respectively. This impressive price performance is backed by the Federal Reserve’s approval of the company’s risk management and governance overhaul plan, its prudent cost-management efforts and a strong liquidity position.
Also, increased optimism on the back of an accelerated recovery of the banking industry, aided by an extensive vaccination drive, additional government spending and an expectation of robust economic growth favored the company’s price performance.
Moreover, this currently Zacks Rank #3 (Hold) stock has been witnessing upward earnings estimate revisions. Over the past 60 days, the Zacks Consensus Estimate for the same has moved 12.6% north to $2.59 for 2021.
We believe, the following factors can support a steady price appreciation.
Factors in Detail
The key source of Wells Fargo’s earnings stability is its diversified business profile. Over the past few years, the company has completed a number of opportunistic transactions, which enabled it to offer a wider range of products and services. This has been the key driver in recent years. Notably, Wells Fargo is likely to continue pursuing opportunistic deals, which are strategic fits and also help diversify its revenue base.
Wells Fargo continues to capitalize on its deposit base, which has been growing since the last few years. Notably, the company ranks third among the major Wall Street biggies in terms of deposits held. Also, with the consistent resurgence of the economy and business activities, deposit balance is likely to continue growing and strengthen the bank’s liquidity position.
The company’s discreet expense management initiatives uphold its financials. Over the last four years (ended 2020), its cost base witnessed a negative CAGR of nearly 1%. The company made efforts to reduce its expense base to $53 billion in 2021 by forming a more potent entity with a streamlined organizational structure, closing branches (targets to close 250 in 2021) and trimming headcount by amending operations and other back-office teams. Such resolutions are likely to foster its bottom-line growth.
As of Dec 31, 2020, the company held debt worth $271.9 billion and has recorded a decline over the past few quarters. Further, cash and cash equivalents were $264.6 billion as of the same date and has shown improvement over the same tenure. Thus, given its sound liquidity profile, we believe Wells Fargo will be able to pursue growth opportunities.
Despite the macro constraints, Wells Fargo’s credit quality is normalizing. This trend is expected to continue, providing room for propelling future earnings. Moreover, net charge-offs remained near a low level of 26 basis points as a percentage of average loans (annualized) as of Dec 31, 2020, reflecting the benefit of a diversified loan portfolio. Hence, with the gradual recovery of the economy, credit quality is anticipated to refine in the quarters ahead.
Western Alliance Bancorporation’s (WAL - Free Report) earnings estimate has moved north in 30 days’ time. Further, the company’s shares have surged 186.2% over the past six months. At present, it flaunts a Zacks Rank #1 (Strong Buy).
Cowen Group, Inc. has witnessed recorded upward earnings estimate revision for next year in the past 30 days. This currently Zacks #1 Ranked stock has appreciated 132.8% over the past six months.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
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Wells Fargo (WFC) Rises 32.4% YTD: What's Driving the Stock?
Shares of Wells Fargo & Company (WFC - Free Report) have rallied 32.4% year to date compared with the S&P 500 and the industry’s growth of 5.4% and 23.7%, respectively. This impressive price performance is backed by the Federal Reserve’s approval of the company’s risk management and governance overhaul plan, its prudent cost-management efforts and a strong liquidity position.
Also, increased optimism on the back of an accelerated recovery of the banking industry, aided by an extensive vaccination drive, additional government spending and an expectation of robust economic growth favored the company’s price performance.
Moreover, this currently Zacks Rank #3 (Hold) stock has been witnessing upward earnings estimate revisions. Over the past 60 days, the Zacks Consensus Estimate for the same has moved 12.6% north to $2.59 for 2021.
We believe, the following factors can support a steady price appreciation.
Factors in Detail
The key source of Wells Fargo’s earnings stability is its diversified business profile. Over the past few years, the company has completed a number of opportunistic transactions, which enabled it to offer a wider range of products and services. This has been the key driver in recent years. Notably, Wells Fargo is likely to continue pursuing opportunistic deals, which are strategic fits and also help diversify its revenue base.
Wells Fargo continues to capitalize on its deposit base, which has been growing since the last few years. Notably, the company ranks third among the major Wall Street biggies in terms of deposits held. Also, with the consistent resurgence of the economy and business activities, deposit balance is likely to continue growing and strengthen the bank’s liquidity position.
The company’s discreet expense management initiatives uphold its financials. Over the last four years (ended 2020), its cost base witnessed a negative CAGR of nearly 1%. The company made efforts to reduce its expense base to $53 billion in 2021 by forming a more potent entity with a streamlined organizational structure, closing branches (targets to close 250 in 2021) and trimming headcount by amending operations and other back-office teams. Such resolutions are likely to foster its bottom-line growth.
As of Dec 31, 2020, the company held debt worth $271.9 billion and has recorded a decline over the past few quarters. Further, cash and cash equivalents were $264.6 billion as of the same date and has shown improvement over the same tenure. Thus, given its sound liquidity profile, we believe Wells Fargo will be able to pursue growth opportunities.
Despite the macro constraints, Wells Fargo’s credit quality is normalizing. This trend is expected to continue, providing room for propelling future earnings. Moreover, net charge-offs remained near a low level of 26 basis points as a percentage of average loans (annualized) as of Dec 31, 2020, reflecting the benefit of a diversified loan portfolio. Hence, with the gradual recovery of the economy, credit quality is anticipated to refine in the quarters ahead.
Stocks to Consider
M&T Bank Corporation (MTB - Free Report) has witnessed upward earnings estimate revisions for 2021 over the past 60 days. Moreover, this presently Zacks Rank #2 (Buy) stock has gained 52.6% over the past six months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Western Alliance Bancorporation’s (WAL - Free Report) earnings estimate has moved north in 30 days’ time. Further, the company’s shares have surged 186.2% over the past six months. At present, it flaunts a Zacks Rank #1 (Strong Buy).
Cowen Group, Inc. has witnessed recorded upward earnings estimate revision for next year in the past 30 days. This currently Zacks #1 Ranked stock has appreciated 132.8% over the past six months.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.
Click here for the 4 trades >>