Bank of America Sinks on Earnings Loss Based on 'Noisy' Report

     I had looked at the different moving parts that might effect the stock and the overall market last night.

     http://diaryofarepublicanhater.blogspot.com/2014/04/what-to-expect-in-market-for-Wednesday.html

      However, the thing I missed was that BAC had to recognize a $9/5 billion in a payment to the FHA. The stock had a loss thanks to this charge off and the market sold it today, dropping it beneath $15.80 early, though it did make up some by the end of the day, finishing at $16.13.

     No question the bears won today. Yet I agree with many analysts that argue that the move was very overdone and shortsighted. What matters in any earnings report is what the numbers say about a firm's future earning potential. The fact this payment was a one time loss means that while it gave BAC negative earnings this quarter this is only one time. The core of the business looks much better and some analysts argue that it actually has done a good job in settling this case. 

    "Bank of America (BAC) reported earnings this morning and the greeting from investors has been quite rude. Shares are trading down nearly three percent as of this writing and in this piece, I intend to explain why I think that reaction is overdone and why there is reason for optimism in BAC's results that is being missed by investors."

      "Bears are winning the battle right now with shares getting hammered but the reasons, I believe, are shortsighted. One analyst says the reason the stock is down is due to a lack of clarity for how the bank will reach its EPS estimates this year and next. However, if this analyst was paying attention, adjusted EPS of 35 cents blew past the estimates that were for only 27 cents. And I know what bears will say; "adjusted" EPS is not EPS and they're right, but litigation is a one-time expense and is not part of BAC's core business. If you strip out all the noise from the earnings report, BAC had a great quarter. A $6 billion charge is not a normal occurrence and to reduce BAC's outlook due to this is shortsighted and imprudent."

     http://seekingalpha.com/article/2144903-bank-of-americas-results-encouraging-sell-off-overdone

     Is it a time to buy? I tend to think so which is probably why I bought 40 more $17 calls for May 17 this time-my other 90 calls at $17 expire May 2. Others think the same thing. Cramer argues that JPM had a bad quarter but there weren't any other bad quarters, that the market is overreacting. 

      http://www.cnbc.com/id/101590231

      "Bank of America (BAC) just sold off after reporting earnings as I predicted it would in my earnings preview article. The earnings report was mixed with quite a bit of noise in the numbers. Nonetheless, there were plenty of gold nuggets to be found. Furthermore, the stock appears to be bottoming as we speak. In the following sections I will lay out my case as to why now may be the perfect time to buy."

     "Bank of America reported a loss of 5 cents in the first quarter on revenue of $22.8 billion. This is a significant miss from the consensus estimate of earnings of 6 cents per share. Revenue of $22.8 billion beat estimates by $420 million, yet was down 3% year-over-year. A onetime charge due to litigation expense by the company is predominantly accountable for the miss. This was the first loss reported by the bank since 2011."

    "On the brighter side, the bank reported the best Fixed Income Clearing Corporation results seen so far out of all the banks, rapidly declining legacy asset servicing expenses, stable net interest margins, and strong capital and liquidity ratios. Wealth Management net income came in at $729 million vs. $721 million a year ago."

     http://seekingalpha.com/article/2145483-bank-of-america-now-is-the-perfect-time-to-buy

     I couldn't agree more with the writer here:

     "You have to see the forest through the trees. It seems most of the selling is by investors who have decided to sell now and ask questions later. The bank is making great strides where it really counts. The litigation expenses are related to the past and will subside with time. I posit this sell off may mark the low point for the stock."

     The loss of five cents is clearly very misleading yet this is how many investors evidently read it at first. So score today for the bears but I think it may have bottomed today. I can't see that it has much down side from here-it held $16 after the bears had it way under all day. If that's so it can either stay totally sideways or it will move up enough for me to see big gains. I think it's at least plausible that it can get at least to the high 16s if not 17 in the near future. If so and if the Alpha writer is right that it's a buy that's what will happen.