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Strength Seen in Wells Fargo (WFC): Can Its 5.8% Jump Turn into More Strength?

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Wells Fargo (WFC - Free Report) shares rallied 5.8% in the last trading session to close at $50.51. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 11.5% gain over the past four weeks.

Shares of Wells Fargo rallied for the third consecutive day and touched a 52-week high of $50.55. The Federal Reserve has signaled end of the current rate cycle and kept the interest rates unchanged at 22-year high of 5.25-5.5% at the end of two-day FOMC meeting. The central bank also indicated three interest rate cuts by 2024-end.

These favorable developments turned investor sentiments bullish on bank stocks as high funding costs being faced by the industry players will somewhat come down next year. This will support net interest income and margin growth. Hence, the WFC stock moved higher.

This biggest U.S. mortgage lender is expected to post quarterly earnings of $1.23 per share in its upcoming report, which represents a year-over-year change of +83.6%. Revenues are expected to be $20.29 billion, up 3.2% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Wells Fargo, the consensus EPS estimate for the quarter has been revised 1.5% lower over the last 30 days to the current level. And a negative trend in earnings estimate revisions doesn't usually translate into price appreciation. So, make sure to keep an eye on WFC going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Wells Fargo belongs to the Zacks Banks - Major Regional industry. Another stock from the same industry, Citigroup (C - Free Report) , closed the last trading session 1.8% higher at $50.24. Over the past month, C has returned 9.9%.

Citigroup's consensus EPS estimate for the upcoming report has changed -3.3% over the past month to $1.16. Compared to the company's year-ago EPS, this represents a change of +5.5%. Citigroup currently boasts a Zacks Rank of #3 (Hold).


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