Why All Is Not Well At Wells Fargo & Co (NYSE:WFC) Ahead Earnings

Benjamin Roussey - July 9, 2014

Boston, MA 07/09/2014 (wallstreetpr) – Fargo & Co (NYSE:WFC) reports its 2Q2014 earnings this week on July 11 as its Wall Street peers are expected to report next week.

As the reporting day approaches, all is not well at the world’s most valuable bank. The company is at risk of ending its sterling performance record of 17 quarters of rising earnings per share. That is because of the industrywide slump in revenue amid high-interest rates and reduced mortgage activities.

Although Fargo & Co (NYSE:WFC) survived revenue slumps in the past quarters because of one-time gains, the continued decline in revenue is likely to overcome the impact of one-time gains in the company.

Consensus estimate

Fargo & Co (NYSE:WFC) will have to hit $1.06 per share in its 2Q so as to continue an interrupted streak of consecutive earnings increases. However, if consensus estimates from 31 analysts is anything to go by, bank will report $1.01 per share.

Although the figure would be $0.03 more than the earning realized in the same period a year earlier, it will interrupt the bank’s streak of earnings increases after 17 quarters. The bank has smashed consensus estimated in 10 straight quarters.

Analysts estimate that Wells will be one of the only two big lenders expected to post year-over-year increases in earnings in 2Q. The other bank is Morgan Stanley (NYSE:MS).

The Wells’ 2Q revenue is also expected to decline 3 percent.

Diversified business

With good news lacking in mortgage lending business, Fargo & Co (NYSE:WFC) and its peers are diversifying operations to overcome the revenue shortfall. However, the contribution from units such as retail brokerage sales and investment banking are still too small to replace the revenue loss.

In addition to the drop in mortgage revenue, Fargo & Co (NYSE:WFC) has also been hit with costly legal settlements leading to loss of several billions of dollars.

Shares of Fargo & Co (NYSE:WFC) are up more than 15 percent since the beginning of 2014.

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Benjamin Roussey

Benjamin Roussey is from Sacramento, California. He has two master’s degrees and served four years in the U.S. Navy. His bachelor’s degree is from CSUS (1999) where he was on a baseball pitching scholarship. His second master’s degree is an MBA in Global Management from the University of Phoenix (2006). He has worked for small businesses, public agencies, and large corporations. He has lived in Korea and Saudi Arabia where he was an ESL instructor. Benjamin spends his time in between Northern California and Cabo San Lucas, Mexico, committing himself to his craft of freelance and website writing. http://www.facebook.com/ben.rouss

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