BMO Capital Markets analyst James Fotheringham has maintained the Market Perform rating on Bank Of America Corporation BAC, but has lowered the price target to $36 from $37.
In light of BAC’s 4Q23 fees and cost-driven miss, the analyst has lowered the near-term estimates by 7% due to higher than previously modeled operating and credit costs, coupled with lower expected share repurchases.
Fotheringham believes there is more reliable return potential from other U.S. FIG (Financial Institutions Group) stocks under his coverage.
For example, the analyst highlighted greater investment opportunities among aircraft lessors AerCap Holdings N.V. AER and Air Lease Corporation AL, which will likely benefit from lesser exposure to funding, regulatory, and credit risks.
During the recently reported fourth quarter, BAC’s revenue, net of interest expense, diminished 10% year-over-year to $22.0 billion. Adjusted revenue declined 4% Y/Y to $23.5 billion, missing the consensus of $23.7 billion.
The analyst mentions that the company’s core EPS of $0.66 missed the consensus of $0.71 by roughly 7% due to lower-than-expected non-interest revenues and higher core operating expenses.
Fotheringham has lowered BAC’s 2024E core EPS estimate by 5% (to $3.13 from $3.29) due to higher than previously modeled operating and credit costs.
The analyst adds that the company’s 2025 core EPS estimate is essentially unchanged (now $3.50, was $3.51).
Price Action: BAC shares closed lower by 2.07% to $32.12 on Tuesday.
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