Wells Fargo extended its recent winning streak to six straight sessions Friday despite missed expectations on third-quarter revenue. Investors focused instead on the bank running leaner and generating better-than-expected profitability. Total revenue for the three months ended Sept. 30 fell 2.4% versus last year, to $20.37 billion, missing analysts’ expectations of $20.42 billion, according to LSEG. Wells Fargo reported results before Friday’s opening bell. Earnings of $1.52 per share, however, was above Wall Street’s consensus estimate of $1.28 per share, LSEG data showed. Adjusted EPS excluded a 10-cent-per-share hit due to “losses on debt securities related to a repositioning of the investment securities portfolio.” That said, even before the adjustment, the reported EPS of $1.42, still looks good versus expectations. As for guidance , it was a bit mixed. However, the more important factor is that management believes net interest income (NII) pressure resulting from interest rate dynamics is bottoming out and expects it to rebound in 2025. WFC YTD mountain Wells Fargo YTD Shares of Wells Fargo surged 6% on the release to more than $61. That’s just shy of their 52-week high of $62.55 back in May, which was also the highest level since January 2018. Bottom line We’re raising our price target on the stock to $66 per share from $62 and reiterating our buy-equivalent 1 rating . The reasons are three-fold: We like the efficiency gains at the bank; the progress being made to get the Federal Reserve-imposed asset cap lifted; and the optimistic outlook for the economy and inflation. Commentary Wells Fargo’s quarterly revenue disappointed as net interest income came up short due to a miss in the bank’s net interest margin (NIM) as both loan and deposits were a bit lower than expected. That’s the bad. The good, however, more than offsets those misses. Non-interest income, or fee-based income, which has been a major focus for the Street, advanced nearly 12% year over year and exceeded expectations. Fee-based income growth is a major factor in our investment thesis as it is more predictable and allows the bank to be less at the mercy of interest rate dynamics that it can’t control. Wells Fargo Why we own it : We bought Wells Fargo as a turnaround story under CEO Charlie Scharf. He’s been making progress cleaning up the bank’s act and fixing its previously bloated cost structure after a series of misdeeds before his tenure. Scharf has also been working to get the Fed’s $1.95 trillion asset cap lifted and to boost Wells Fargo’s fee-generating revenue streams. Competitors : Bank of America and Citigroup Weight in Club portfolio : 4.76% Most recent buy : Aug. 7, 2024 Initiated : Jan. 8, 2021 CEO Charles Scharf kicked off his prepared remarks on the conference call by saying, “Our earnings profile is very different than it was five years ago, as we’ve been making strategic investments in many of our businesses and deemphasizing or selling others. Our revenue…
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