Bank earnings: Why bank stocks' outlook isn't what it seems
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With 2024 off to a rocky start, Wall Street is hoping for smoother sailing to come in the rest of the year. As Big Banks will start to report fourth-quarter earnings on Friday, January 12, many are feeling the upcoming dread as banks are expected to report lower profits after setting money aside to cover souring loans while paying more to depositors.
Christine Short, Wall Street Horizon VP of Research, joins Yahoo Finance to give insight into why investors should reframe their points of view on the outlook for bank stocks as they look for investment opportunities.
"Sell-side analysts have been lowering their guidance, that's because companies have been lowering their guidance. I always take that with a bit of a grain of salt," Short explains. "Going into the season, companies pull back a little bit. They're conservative because they want to lower that bar so that they end up beating, the stock pops, it's ultimately better for the stock."
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Nicholas Jacobino.
Video Transcript
SEANA SMITH: Yes, it has certainly been a rough start to the year for stocks with all three of the major averages ending the first week of the year, lower snapping that nine week winning streak. Now analysts as a result of some of the recent moves and valuations that we've seen for the companies lowering their earnings projections for S&P 500 companies heading into the fourth quarter earnings season, that kicks off on Friday. We'll hear from a number of the big banks.
Now despite some of the sour sentiment that we are hearing on the street, our next guest identifying two potential bright spots for banks this earnings season. We want to bring in Christine Short Wall Street horizons Vice President of Research.
Christine, it's great to have you here. So I think investors, as we take a step back and we're trying to play out or design this playbook here for our viewers heading into earnings season, starting with the banks. What are you a bit optimistic about heading into these reports?
CHRISTINE SHORT: So despite the lay of the land that you just gave, yes, companies guidance has been lowered or analysts have been lowering-- sell-side analysts have been lowering their guidance. That's because companies have been lowering their guidance.
I always take that with a bit of a grain of salt, right? Because going into the season, companies pull back a little bit. They're pretty conservative because they want to lower that bar so that they end up beating, the stock pops, right? It's ultimately better for the stock.