Are Industry Analysts More Bearish on Wells Fargo?

Wells Fargo has been a focus company for the market since the Consumer Finance Protection Board fined the company on September 8 for opening fraudulent customer accounts. The company remained a focus during the past week. On October 13, Chairman and CEO John Strumpf announced his retirement, and on October 14 the company reported actual EPS of $1.03, compared to the mean EPS estimate of $1.01.

Fallout for Wells Fargo

From August 31 through October 13, the price of the stock dropped by 11.9% (to $44.75 from $50.80). Given the negative news surrounding the company over the past several weeks, have analysts become more bearish in their outlook on Wells Fargo? Have they made any significant downward revisions to their EPS estimates, targets, and ratings for the company?

In terms of EPS expectations, the answer is no. Analysts have not made significant changes to EPS estimates for either fiscal year 2016 or fiscal year 2017 in recent weeks. The mean EPS estimate for FY 2016 ($4.02) is 0.2% below the mean EPS estimate for FY 2016 on August 31 ($4.03). The mean EPS estimate for FY 2017 ($4.12) is 1.5% below the mean EPS estimate on August 31 ($4.18).

In terms of ratings, the answer is also no. Most of the 33 analysts covering Wells Fargo have not made any changes to their opinions in recent weeks. The overall number of Buy ratings has increased by two (to 19 from 17) since August 31. The overall number of Hold ratings has decreased by two (to nine from 11) over this same time frame. The overall number of Sell ratings has increased by one (to five from four) during this period. At this point in time, 58% of the ratings on Wells Fargo are Buy ratings, 27% of the ratings are Hold ratings, and 15% of the ratings are Sell ratings.

However, In terms of target prices, Wells Fargo has seen downward revisions. In aggregate, analysts have lowered their mean target price for Wells Fargo by 4.7% since August 31. However, this mean target price is still 13.5% above the October 13 closing price of $44.75.

Read more about earnings trends in this edition of FactSet Earnings Insight. Visit www.factset.com/earningsinsight to launch the latest report.