On Wednesday, Baird made adjustments to its financial outlook for Bank of America Corporation (NYSE:BAC), raising the price target from the previous $35.00 to $38.00, while maintaining a Neutral rating on the stock. The adjustment followed the bank's report of its first-quarter earnings for 2024, which were closely aligned with analyst expectations.
Bank of America disclosed a core earnings per share (EPS) of $0.76 for the first quarter of 2024, marginally below the consensus estimate of $0.77. Despite incurring around $700 million in special assessment expenses from the Federal Deposit Insurance Corporation (FDIC), the financial institution managed to return approximately $4.4 billion to its shareholders. This return included around $1.9 billion in dividends and about $2.5 billion through stock repurchases.
The bank's pre-provision net revenue (PPNR) showed a sequential increase of approximately 16%, although it represented a year-over-year decline of 6%. This was attributed to a significant rise in fees, which saw a 47% increase from the previous quarter, combined with relatively stable net interest income (NII) that exhibited a modest 1% quarter-over-quarter growth. However, the bank's expenses rose by 6% compared to the previous quarter, which was higher than anticipated.
While Bank of America's financial results were generally viewed as satisfactory, concerns were noted regarding weaker credit trends, particularly in commercial real estate (CRE) and card loans. Despite these issues, Baird suggested that Bank of America's stock is becoming increasingly attractive when compared to its peers within the mega-cap banking sector, especially considering its trading at roughly 1.4 times its tangible book value (TBV).
InvestingPro Insights
Following Baird's recent price target update for Bank of America Corporation (NYSE:BAC), data from InvestingPro shows a nuanced picture of the bank's financial health and market performance. Bank of America's market capitalization stands at a robust $272.82 billion, reflecting its significant presence in the banking sector. The bank's Price/Earnings (P/E) ratio, an indicator of market expectations about growth and profitability, is currently at 12.41, with an adjusted P/E for the last twelve months as of Q4 2023 at a slightly lower 11.01. This suggests that investors may be seeing value in the company's earnings potential relative to its share price.
Moreover, Bank of America has demonstrated a commitment to shareholder returns, having raised its dividend for 10 consecutive years, with a notable dividend yield of 2.56%. This, coupled with a 9.09% dividend growth over the last twelve months, may appeal to income-focused investors. Additionally, InvestingPro Tips highlight that the company has maintained dividend payments for 54 consecutive years and has experienced a strong return over the last three months, with a 3-month price total return of 18.76%.
For those considering an investment in Bank of America, it's worth noting that analysts have revised their earnings upwards for the upcoming period, signaling potential optimism in the bank's future performance. At the same time, the company has been profitable over the last twelve months, which could provide a sense of stability for investors. For more in-depth analysis and additional InvestingPro Tips, visit InvestingPro. Remember, using coupon code PRONEWS24 will get you an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 6 more tips available on InvestingPro, investors can gain a comprehensive understanding of Bank of America's investment potential.
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