US bank earnings and price forecasts: Wells Fargo Q2 2022 results preview

[MongiIG]

Wells Fargo Q2 results are expected to show a year on year decline in both earnings and revenue.

Source: Bloomberg

 

Shares Wells Fargo Price–earnings ratio Price Citigroup Share price

 Shaun Murison | Senior Market Analyst, Johannesburg | Publication date: Tuesday 12 July 2022 

When are the Wells Fargo results expected?

Wells Fargo is set to release second quarter (Q2) results for the fiscal year 2022 on 15 July 2022.

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

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

• Revenue of $17.580 billion: -13.27% year on year (YoY)
• Earnings per share $0.83: -39.91% YoY

How to trade Citigroup into the results

Source: Refinitiv

Refinitive data shows a consensus of (28) analyst ratings at ‘buy’ for Wells Fargo. A mean of estimates suggest a long-term share price target of $54.70 for the company. The current share price trades at a 37% discount to this assumed long-term fair value (as of the 12th of July 2022).

Source: IG

IG sentiment data shows that 86% of clients with open positions on the share (as of the 12th of July 2022) expect the price to rise over the near term, while 14% of these clients expect the price to fall.

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

Source: IG

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

Wells Fargo currently trades at a slight discount to its sector peers in terms of a historical P/E and slight premium in terms of a forward P/E assumption. The company has a lower historical dividend yield to its peers in aggregate.

Wells Fargo – technical view

Source: IG charts

The long term price trend for the share price of Wells Fargo 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.

A downside break (confirmed with a close) of the 39.85 level would call for further decline with 34.40 the initial target considered. Only if a rebound takes the price back above the major high at 46.10, would we reassess the merits of returning a long bias to trades on the company.

Summary

• Wells Fargo is set to release Q2 2022 results on 15 July 2022
• Q2 2022 are expected to show a year on year decline in both revenue and earnings per share
• Long-term broker consensus suggests the share to currently be a ‘buy’, with a longer term price target of $54.70
• IG clients with open positions on the share are predominantly long