Bank of America (BAC) stock is trading lower Thursday despite the financial giant reporting higher-than-expected results for its fourth quarter.
In the three months ending December 31, Bank of America's revenue increased 15.4% year over year to $25.5 billion, boosted by higher asset management and investment banking fees, as well as increased sales and trading revenue. Its earnings per share (EPS) more than doubled from the year-ago period to 82 cents.
"We finished 2024 with a strong fourth quarter. Every source of revenue increased, and we saw better-than-industry growth in deposits and loans," said Bank of America CEO Brian Moynihan in a statement.
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He added that the big bank ended the year with "strong capital and liquidity" and was able to return $21 billion to shareholders through stock buybacks and dividends. "We believe this broad momentum sets up 2025 very well for Bank of America," he said.
The results beat analysts' expectations. Wall Street was anticipating revenue of $25.2 billion and earnings of 77 cents per share, according to CNBC.
BAC continued the momentum sparked by several big banks on Wednesday, says David Wagner, portfolio manager at Aptus Capital Advisors.
He adds that the company's outlook points to upside in net interest income in Q1, a trend that's being rewarded by the market right now. "Couple this with being efficient on the expense side of the ledger, the market loves net interest margin expansion."
Is Bank of America stock a buy, sell or hold?
Bank of America stock has outperformed the broader market over the past year, up 47% on a total return basis (price change plus dividends) vs the S&P 500's 26% gain. (Those dividends are one reason BAC has an outsized weighting in the Berkshire Hathaway equity portfolio.)
And Wall Street thinks the financial stock has more gas in the tank. According to S&P Global Market Intelligence, the average analyst target price for BAC stock is $50.85, representing implied upside of more than 9% to current levels. Additionally, the consensus recommendation is a Buy.
Financial services firm Truist Securities is one of those with a Buy rating on BAC.
Big banks, in general, "are positioned to leverage embedded offense, cyclical recovery and capital flexibility to drive organic franchise expansion, double-digit EPS growth and attractive ROTCE [return on average tangible common equity] over 2025 and 2026, says Truist Securities analyst John McDonald.
For BAC, specifically, McDonald thinks the bank "can generate peer-leading NII growth over the next two years." He also anticipates Bank of America buying back roughly $42 billion in stock between 2025 and 2026, which should drive notable earnings-per-share growth.
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