Bank of America Corporation (NYSE: BAC) is schedule to release its 3rd quarter 2010 earnings on October 19th, 2010 at 7AM EST. Bank of America now trades at about a 25% premium to its tangible book value of approximately $12 per share, down from a 50% premium in April of 2010. The stock also trades at just 8-times next year's consensus estimate, and bulls would contend that current estimates are well below historical levels, making the stock much more attractive.
On July 16, Bank of America reported 2nd quarter 2010 earnings of $0.27 per share, versus $0.47 in the year-ago quarter and $0.36 per share in the previous quarter. The consensus estimate for the quarter was $0.23 per share so, on the surface, BofA beat estimates. Asset sales added a net $0.12 per share to earnings and a $1.7 billion credit loss reserve release added $0.17. A fair value adjustment on Merrill notes (+$0.12), and a dividend from China Construction Bank (+$0.05) also boosted the bottom line, as did a below-average effective tax rate of 17%. BAC revenues did not hold up as well as JPM's in the second quarter. Revenues were down 9% from the first quarter and 18% from the year-ago quarter. A steep decline in trading and investment banking revenues were the key drivers. However, mortgage banking revenue was also down sharply from the previous quarter despite a new surge in refinancing. Net interest revenue came in well below the forecast in our model, as assets were flat but the net interest margin declined. Loans and deposits both fell once again as the economy remains sluggish.
For the 3rd quarter of 2010, the average analyst estimate for earnings is 17 cents per share, with a high estimate of 33 cents per share and a low estimate of 9 cents per share. For the full year ending December 2010, the average estimate is 94 cents per share with a high estimate of 1.22 per share and a low estimate of 77 cents per share. The average revenue estimate for the 3rd quarter of 2010 is 27.19 billion dollars, with a high estimate of 29.90 billion dollars and a low estimate of 25.90 billion dollars. Over the past 90 days, the average estimate has declined by 35% from 23 cents per share to 17 cents per share. Most of this decline came in the between 60-90 days ago.
Bank of America is trading near $13 dollars per share, which is in the lower quarter of the 12.18 – 19.86 52-week range. The price to earnings ratio for BAC is 88, with debt to equity of 188%. The company has a market capitalization of 133.14 billion dollars, with a dividend yield of .3% and a profit margin of 2.9%. The EPS percent change from last quarter is -18%, and the 3 year EPS growth rate is -72%. The Sales percent change from the prior quarter is -13%, and the 3-year sales growth rate is 8%.
