Talking Points:
- Wal-Mart forecasted flat net sales growth for the current fiscal year, noted negative impact from exchange rate fluctuations
- As analyst estimates for the financial sector has declined, Bank of America and Wells Fargo topped expectations
- 3Q Revenue results from Bank of America and Wells Fargo posted mixed results during challenging capital market conditions
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Third quarter earnings season continues to forge highs and lows. Wal-Mart updated with a forecast for net sales growth through the current fiscal year to be flat and forecasted earnings for fiscal year 2017 to decrease 6 to 12 percent. A stronger-than-anticipated impact from unfavorable exchange rate fluctuations was highlighted as a particularly important factor in the downgrades. Wal-Mart’s shares traded 10 percent lower on the day following the somber guidance.
In addition to the exceptional volatility stirred by the Wal-Mart guidance, third quarter earnings updates from a number of important financial institutions shaped expectations for one of the economy’s more important sectors – and one of its most troubled over the past decade.
Bank of America posted a profit of $4.5 billion, or $0.37 per share, beating analyst estimates of $0.34 per share. Bank of America saw a substantial increase from a net loss of $232 million one year ago. The net loss in the third-quarter of 2014 was related to a settlement with the US government over mortgages, and as those legal costs have decreased it has helped to boost net income.
Wells Fargo & Co. posted a profit of $5.8 billion, or $1.05 per share, beating analyst estimates of $1.04 per share. The company’s net income was up 1 percent and earnings per share up 3 percent from the third-quarter of 2014.
As these financial firms posted better than expected earnings, analyst estimates for the financial sector have increasingly declined since the beginning of 2015. The lower general trajectory of earnings and guidance can be overshadowed as these companies seem to easily top estimates that are moving lower. A look at the top line numbers reported by these firms showed mixed results that have reflected challenges in the capital markets. Bank of America’s revenue decrease 2.4 percent while Wells Fargo revenue increased 3 percent relative to the third-quarter.
Financial equities have extended their gradual recovery from 2009’s post-crisis lows; yet through more recent challenging market conditions, the sector is has fallen 6.6 percent year-to-date. This performance lags behind the broader S&P 500.
