Yesterday morning, Bank of America (BAC) hit a 52-week high. Over 25% of stocks in the S&P 500 have now hit a new 52-week high this week. A little over a year ago, BAC was $3 and change per share. How could the government let America’s No. 1 bank fail? Simply put, they could not. We all know the repercussions all pointed to civil unrest.
Today, less BAC employees are thinking about jumping out of windows (Is the Recession Killing Us?) as the Fed is injecting more liquidity into bank profits. You can now call BAC a $19+/share turnaround success story since hitting rock bottom lows 13 months ago.
BAC Earnings Beat Estimates
This morning, BAC reported earnings of $.28 per share. The consensus analyst estimate of 23 analysts surveyed by Thomson Reuters was $.09 per share. Thus, BAC beat the street earnings estimate by $.19 per share. Still, a year ago in the same period BAC earned $.44 per share, a year over year decline in profitability. On the top-line side of the quarterly report, BAC revenues were $32 billion — much higher than analysts’ expectations of $27.90 Billion.
“The 2010 story appears to be one of continuing credit recovery, and our results reflect a gradually improving economy,” said CEO Brian Moynihan in the quarterly report statement.
BAC delivered profitability in 5 of its 6 major business units. Strong trading revenue allowed BAC to hedge the losses on consumer loans. A weak housing market and soft home mortgage activity continue to plague BAC, the one non-profitable business unit this quarter. BAC had to set aside even more money for mortgage losses this quarter, $3.6 Billion, as the loss continues to widen.
BAC Fundamentals have Improved
Price: $19.48 per share
Market Cap: $195.42 Billion
Forward P/E: 10.15
Trailing P/E: N/A
Revenue: $9.16 per share
Cash: $51.60 per share
Book Value: $22.45
BAC Technicals are Much Stronger, but Price is Extended
The BAC 50 day moving price average is ~$16.80 and the 200 day moving price average is ~$15.40. At BAC’s closing price level of $19.48, a prudent investor must see the spread between the actual price and the moving average prices growing as a riskier entry point than once before.
Disclosure: No positions in the companies mentioned.