Friday, April 18, 2008

a preview of bac's earnings on monday

while analyst consensus for bac's first-quarter 2008 results (due early Monday morning) are for earnings of 41 cents per share on $16.46 billion in net revenue, and for year-over-year declines of 65% and 4% respectively, the real issue for the company and the one question investors have to be asking is: how much (in losses and dilution, if any) can we expect and how soon will it happen?

will bac's news be as bad as wb's or will they be more like jpm, given the capital markets presence?

a note out of credit suisse's bank team on 4/3/08, analyzing both bac and wb for capital adequacy and excess capital generation, found both banks wanting, but bac was thought to be in relatively better shape than wb. one interesting line from the report: "Based on our analysis, BAC appears better positioned to recoup any potential capital shortfalls near term (excluding dividends) with its respectable pre-provision, pre-tax profitability."

i've owned calls on bac for awhile now. i think by this time next year the stock will be appreciably higher; and the cfc acquisition at that time will look much more savvy to alot more investors. but if i had to advise someone who's interested in getting into the name for the first time, i suppose i'd say wait until after the report. if it were 10% lower, i'd say otherwise, but it's not.

the estimated 2008 dividend of $2.56 is now giving bac a current yield of better than 7%, and the payout ratio is better than two-thirds of current earnings. bac is weathering the storm; i obviously think it's undervalued since i own it already; but for those wanting to jump in - wait until after the report on monday to decide.

long bac

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