Wells Fargo's Surprising Q1 Earnings Beat Sparks Analyst Frenzy And Price Target Adjustments

Wells Fargo & Co WFC Friday reported better-than-expected results for its first quarter, triggering some price target changes by analysts. Here are some other key analyst takeaways from the earnings call.

Oppenheimer On Wells Fargo

Analyst Chris Kotowski maintained a Perform rating on the stock.

The first-quarter earnings included around 14 cents per share of reserve builds, “excluding which we'd place core economic EPS as high as ~$1.37,” Kotowski said in the note.

“The key takeaway is that net interest income was down only 0.7% Q/Q, which after considering the two fewer days (or 2.2% less) suggests underlying growth despite the widespread view of a 4Q22 peak,” the analyst further wrote.

Following years of pre-provision earnings volatility, the banking major is “becoming better positioned for more consistent quarterly earnings generation,” he added.

Raymond James On Wells Fargo

Analyst David Long reiterated a Strong Buy rating, while raising the price target from $47 to $48.

Wells Fargo delivered a “solid” quarter and maintained its guidance for both net interest income and operating expenses, Long noted.

The bank reported $35.7 billion of exposure to office CRE loans, which represents merely 4% of total loans, the analyst said. The “manageable exposure to office CRE” suggests that “the industry wide credit concern will not be a headwind for Wells,” he added.

Check out other analyst stock ratings.

RBC Capital Markets On Wells Fargo

Analyst Gerard Cassidy reaffirmed a Sector Perform rating and price target of $42.

Wells Fargo’s earnings beat was “driven by higher-than-expected net interest income and noninterest income, partially offset by higher-than-expected noninterest expense and a larger-than-expected provision for credit losses,” Cassidy wrote in a note.

The analyst raised the earnings estimate for 2023 from $4.72 per share to $4.80 per share.

Morgan Stanley On Wells Fargo

Analyst Betsy Graseck maintained a Neutral rating, while raising the price target from $46 to $47.

Although expenses were elevated, operating losses were down $3.3 billion sequentially, and management maintained the expense guidance for 2023, “which we view as a sign that WFC is committed to managing expenses tightly for the rest of the year,” Graseck said in a note.

“We expect tightening lending standards and softening demand to drive tepid loan growth for the remainder of the year,” the analyst wrote. Despite having repurchased $4 billion worth of shares during the quarter, Wells Fargo continued to build excess capital, she added.

WFC Price Action: Shares of Wells Fargo had risen by 2.42% to $40.60 at the time of publication Monday.

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