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US bank earnings and price forecasts: Bank of America Q2 2022 results preview


ArvinIG

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Bank of America’s maintains buy rating ahead of Q2 results, although long-term price trend remains down.

Bank of America
Source: Bloomberg
 
 

When are the Bank of America results expected?

Bank of America (BoA) is set to release second quarter (Q2) results for the fiscal year 2022 (FY22) on 18 July 2022.

What is The Street’s expectations for the Q2 2022 results?

The Street’s expectations for the upcoming results are as follows:

How to trade BoA into the results

Recommendations
Source: Refinitiv

 

Refinitive data shows a consensus of (28) analyst ratings at ‘buy’ for BoA. A mean of estimates suggest a long-term share price target of $44.26 for the company. The current share price trades at a 39% discount to this assumed long term fair value (as of 8 of July 2022).

Client sentiment

Client sentiment
Source: IG

 

IG sentiment data shows that 98% of clients with open positions on the share (as of 8 July 2022) expect the price to rise over the near term, while 2% of these clients expect the price to fall.

How does BoA compare to its peers in terms of valuation?

Comparison
Source: IG

 

The above table compares BoA against a peer average (which includes Goldman Sachs, Citigroup, Wells Fargo, JP Morgan and Morgan Stanley) in terms of dividend yield and price to earnings (P/E) multiples.

BoA currently trades at a slight premium to its sector peers in terms of a historical and forward P/E, although still at a significant discount to the S&P 500 benchmark index (at a P/E of 28 times).

The group’s dividend offering has been slightly lower than its peers in aggregate.

BoA – technical view

Bank of America chart
Source: IG charts

 

The long-term price trend for the BoA share price remains down, evidenced by the price trading firmly below the 200-day simple moving average (SMA) - blue line - and the red trend line on our chart. The share is however moving out of oversold territory in the very near term.

The long-term trend takes precedence with support at 28.15 and 26.60 respective downside targets. Only if a rebound from oversold territory takes the price back above the major high at 37.45, would we reassess the merits of returning a long bias to trades on the company.

Summary

  • BoA is set to release Q2 2022 results on the 18 July 2022
  • Q2 2022 are expected to show a year on year increase in revenue and marginal decline in EPS
  • Long-term broker consensus suggests the share to currently be a ‘buy’, with a longer-term price target of $44.36
  • IG clients with open positions on the share are predominantly long
  • The long-term price trend remains down for BoA
  • Only if a rebound from oversold territory can take the price back above a major high, we would reassess the merits of a long bias to trades on the company once again

Shaun Murison | Senior Market Analyst, Johannesburg
12 July 2022

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