Wells Fargo Stock: On Verge of Earnings Boost?

Investors of Wells Fargo stock (NYSE: WFC) may be smiling come Friday afternoon as the company reports its second-quarter earnings before the opening bell tomorrow morning.

Wells Fargo is expected to announce earnings of 81 cents per share on revenue of $21.32 billion.

Wells Fargo Stock Price (NYSE: WFC)

A good sign is that analysts' earnings per share projections have increased over the last three months from 80 cents, compared to the abundance of companies lowering guidance.

If Wells is able to post a rise in its profits it will be the fourth consecutive quarter in which the bank has posted a profit increase. It should be able to as those expected quarterly profits are almost 16% higher than a year ago and Wells Fargo is starting to stand out more and more in the recently revived financial sector.

From Barclay's (NYSE ADR: BCS) Libor manipulation scandal, to JPMorgan's (NYSE: JPM) "bet" gone wrong and even back to Morgan Stanley's (NSYE: MS) botching of the Facebook IPO, banks have been in the news for all the wrong reasons lately.

But Wells has avoided a lot of the negative news on banks. It's known for playing it safe compared to its Wall Street rivals.

In fact, Jefferies analyst Ken Usdin called Wells "one of the strongest, most respected U.S. banks" when he initiated coverage of the bank Monday with a "Buy" rating.

Wells Fargo Owns the Mortgage Market

Wells owes its success to its booming mortgage business.

It is now the largest bank in terms of market cap and is less exposed to global economic uncertainties because of its focus on U.S. mortgages.

Wells Fargo's position in mortgages has grown significantly since the housing market collapsed in 2008 where other banks such as Bank of America (NYSE: BAC) have dwindled mortgage business due to worthless mortgage portfolios.

During the first quarter of 2012 Wells Fargo initiated $130 billion worth of home loans or 33.9% of all loans handed out in the quarter. That's more than three times its closest competitor, JPMorgan, who accounted for 10.6% of home loans in the U.S.

Wells Fargo Stock Continues to Roll

Wells Fargo stock has done well since the bank began a mortgage push, rising from its low of $8.61 in March of 2009 to its current price near $34, an almost four-fold increase.

Most stocks have bounced back from 2009 lows, but when you look at Wells Fargo's biggest competitors such as JPMorgan and Bank of America, they have not rebounded as well.

JPMorgan hit a low just under $16 and currently trades almost even with Wells. Bank of America reached a low of $3.15 and has only managed to inch back up to $7.60, well off its pre-recession levels.

What might be even more impressive is that Wells Fargo stock is up over 20% in the past twelve months in a time where its biggest competitors have slipped. Bank of America, JPMorgan and Citigroup (NYSE: C) have lost 25%, 12% and 35%, respectively.

As investors take in the earnings reports issued Friday by both Wells Fargo and JPMorgan the key thing is to listen to the forward-looking statements and the tone of that guidance.

It will be important for investors to compare and contrast what numbers each company reports on Friday, but more importantly what those companies say about the sources and direction of revenue.

Wells Fargo stock rose 1% to $33.27 on Wednesday, two days before its earnings report release. Wells will report tomorrow (Friday) at 8 a.m.

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