Which of These 5 Mega-Bank Stocks have the Strongest Earnings Trends?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

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Here’s your Cheat Sheet to how the top 5 bank stocks rank via earnings trends:

UBS AG (NYSE:UBS): Current Price $16.84

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 113,420 106,680 37,250 42,980 46,290
Diluted EPS ($) -1.81 -6.59 -0.70 1.96 1.19

The impact of the financial crisis is starkly visible on UBS’s numbers. Although, revenue numbers have gained steadily. EPS jumped nicely in 2010, but lost a bit in 2011.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 10,170 10,920 9,934 11,020 6,110
Diluted EPS ($) 0.30 0.11 0.24 0.11 -0.62

Obviously, UBS faced a rough quarter in September 2012, when both revenue and EPS went off the cliff. Not the kind of bank we can include on our list…

Citigroup, Inc. (NYSE:C): Current Price $42.68

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 104,350 108,190 111,700 102,590 90,710
Diluted EPS ($) -56.30 -7.99 3.54 3.63 24.40

Citi has been recovering from the economic crisis, but that’s nothing new for banks these troubled times…

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 22,890 25,000 24,080 18,970 22,800
Diluted EPS ($) 0.32 0.95 0.95 0.15 3.80

Of course, we see that December 2012 has been a redeeming quarter. Let’s keep Citi in the race for now…

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Bank of America (NYSE:BAC): Current Price $11.76

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 113,110 150,450 134,190 115,070 100,080
Diluted EPS ($) 0.54 -0.29 -0.37 0.01 0.25

Income is down every year since 2010, but EPS has improved annually during the period.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 29,600 26,890 26,410 24,470 22,310
Diluted EPS ($) 0.18 0.03 0.19 0.00 0.03

Unfortunately, we see that revenue is down every quarter since March 2012, and EPS is shaky at best. Although, EPS is up quarter-over-quarter, so we will keep this one on our list…

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JPMorgan Chase & Co. (NYSE:JPM): Current Price $48.63

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 101,490 115,630 115,480 110,840 108,180
Diluted EPS ($) 1.35 2.26 3.96 4.48 5.20

JPMorgan has weathered the financial storm rather well. We like that EPS has grown steadily every year during this period.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 24,390 29,090 25,130 27,800 26,160
Diluted EPS ($) 0.91 1.19 1.21 1.40 1.39

Unfortunately, we find that EPS in the latest quarter has fallen off, and reluctantly we are not interested in this bank at the moment…

Wells Fargo & Co. (NYSE:WFC): Current Price $34.88

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 51,630 98,640 93,250 87,600 91,250
Diluted EPS ($) 0.70 1.75 2.21 2.82 3.36

This bank too emerged relatively unscathed from the financial meltdown. We find that revenue and EPS have improved steadily over the years.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 22,090 23,000 22,610 22,480 23,160
Diluted EPS ($) 0.73 0.75 0.82 0.88 0.91

Things are humming along nicely on the quarterly numbers too. This maybe our winner, but let’s see the conclusion…

Conclusion

Three banks show a quarter-on-quarter earnings improvement in their latest quarter: Citi, Bank of America and Well Fargo. But the revenue and earning trends are far more consistent at Wells Fargo, who wins this round of the “E-Squared” investment analysis for mega banks.

“E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our successful CHEAT SHEET investing framework. Don’t waste another minute – click here to discover our CHEAT SHEET stock picks now!