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Bank of America (BAC)
Bank of America Earnings Fall 77%
No one is really surprised right now to see poor performance by those companies in the financial sector. Many banks that have recently reported earnings have reported significant losses, a trend that the market has been experiencing for quite a while. Early this morning, Bank of America described their quarterly report, which came in well below expectations, and unsurprisingly its share price has been slipping in early trading. CEO Ken Lewis announced that the results "clearly did not meet our expectations." If you're wondering how much of a loss was reported by this major financial institution, the results are likely to surprise you.
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In fact, the company didn't report a loss! The company remained in the black, with positive earnings of $1.21 billion, or 23 cents per share. The reason this is such negative news is that analysts were expecting a profit of 41 cents per share, which Bank of America clearly didn't even come close to. Also, earnings fell 77% from the year ago period, when Bank of America earned $5.26 billion ($1.16 per share). All in all, the current economic conditions certainly took a toll on Bank of America.
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But on the bright side, the company wasn't hit nearly as hard as many other financial institutions. Last week, Wachovia (WB: Charts, News, Offers) reported a loss of almost $400 million, and Washington Mutual (WM: Charts, News, Offers) reported a loss of over $1 billion. Citigroup (C: Charts, News, Offers) most recently reported a loss of over $5 billion. It is impressive that Bank of America managed to avoid similar losses, as the company is struggling to deal with both the credit crisis and the declining housing market. Some of the major areas that caused Bank of America to struggle was its consumer unit, which experienced a 59% loss in profit, investment banking which fell 92% due to almost $1.5 billion in write downs, and $2.7 billion in charge-offs (loans which will likely be impossible to collect upon). One of the reasons Bank of America is having a hard time is that most of its business is conducted in the United States, so they aren't able to get relief from strong international business as some other companies are able to do.
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Bank of America remains concerned for the rest of the year, indicating their belief that things aren't likely to get much better for consumers or for their company. The company is projecting earnings of $3.30 per share for the entire year – which leaves them far from their goal. If Bank of America expects to reach this level, the remaining three quarters must be very strong. Bank of America will be acquiring Countrywide Financial (CFC: Charts, News, Offers) later this year, a deal which will turn Bank of America into a much larger company, but hopefully will not cause problems for the company as it acquires its struggling competitor. Bank of America will likely face a lot of ups and downs this upcoming year, but as long as it continues to remain making a profit, it continues to remain an important step ahead of many of its major competitors.
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