Bank of America (BAC) is scheduled to report its second-quarter earnings on July 14, 2021. The financial services company’s shares are up 31.5% year-to-date, trading at around $40 a share. While the stock is down about 6% from its 52-week high, the second-quarter report might be the catalyst needed to boost sentiments and possibly fuel another leg higher.
Ahead of the earnings report, let’s take a look at what the Street expects from BAC in Q2.
Earnings Preview
The Street expects Bank of America to report earnings per share of $0.77, more than double the $0.37 reported in the same period last year. In the first quarter, BAC posted earnings per share of $0.86, up 115% year-over-year and above the consensus estimate of $0.66. Revenues in Q1 rose 0.2% to $22.8 billion, also topping analysts’ estimates of $22.13 billion.
Bank of America benefitted from the record or near-record levels of deposits. Investment flows and investment banking revenues were also up as brand loyalty, customer satisfaction, and employee engagement surged to record highs. (See Bank of America stock analysis on TipRanks)
Factors To Look Out For
During the first-quarter earnings call, CEO Brian Moynihan reiterated that Bank of America has emerged from the pandemic stronger and more competitive. Higher capital ratios on the balance sheet and higher reserves were some of the metrics touted, affirming the bank’s financial position.
It will be interesting to see the type of impact a recovering economy had on BAC’s key segments. According to Moynihan, a diverse business model allowed the bank to earn its way through the crisis. Investors will want to see if this momentum continued in Q2.
While the Consumer and Global Banking segment performed well in Q1, it was negatively impacted by the record low-interest-rate environment. Investors will be interested to see how this segment has progressed after Moynihan insisted that these businesses were in “full recovery mode.”
While deposits in the Consumer Banking segment were up 25% in Q1 to $924 billion, loans were down 8% to $291 billion. Investment banking fees in the Global banking segment were up 62% in Q1 to $2.2 billion, and investors will be wanting to see if the growth momentum persisted in Q2.
Additionally, investors will want to know if Bank of America will increase its share repurchase program after management hinted at the same while reporting its Q1 results. The lifting of restrictions by the Federal Reserve has paved the way for financial companies to carry out buyback and dividend programs.
Recent developments
Ahead of the second-quarter earnings report, Bank of America has unveiled a new digital investment advisory program. Personal Retirement Strategy is the bank’s new program that will allow institutional and corporate retirement plan clients to establish and pursue their retirement goals.
In other news, the bank has expanded its digital business to consumer payment capabilities with the unveiling of a new solution, Pay to Card, which supports the ever-growing need to pay consumers quickly and digitally. The solution is designed to enhance and support cross-border transactions via bank cards.
Furthermore, Bank of America is expanding its footprint to establish its first financial center in Kentucky. The bank has opened three centers in Lexington as it strives to bring banking, lending, and small businesses services closer to clients. In addition to the unveiling of the new centers, the bank has added 20 ATMs in the area over the last two years.
Analysts Ratings
Recently KBW analyst David Konrad reiterated a Hold rating on the stock with a $40 price target. This implies that shares are almost fully priced at current levels. According to the analyst, BAC is well-positioned in the current environment based on its excess capital and asset sensitivity.
Overall, the stock has a Moderate Buy consensus rating based on 9 Buys and 4 Holds. The average Bank of America price target of $44.81 implies 12.73% upside potential from current levels.
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