First Republic Ready to Kick Off Bank Earnings Deluge

FRC ended 2020 with a record high

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It's a new year, and one of the first items on the agenda is a fresh batch of corporate reports. As always, bank names are among the first to take the plunge, and First Republic Bank (NYSE:FRC) is no exception. The California-based bank will release its fourth quarter and full year 2020 financial results before the market opens on Thursday, Jan. 14. The company will also be conducting a conference call to discuss the results the same day.

First Republic stock ended 2020 with a sizable 25% gain and closed at a record high of $147.24. Since an early-October bull gap, FRC's 50-day moving average has neatly contained pullbacks. The round-$100 level also emerged as support for the latter half of 2020. Nevertheless, 12 of 19 analysts still rate the stock a "hold" or worse, meaning there's massive upgrade potential that could nudge FRC --which closed Thursday night at $146.93 -- even higher. It may have even already begun; Barclays and Wells Fargo upped their price targets this morning to $156 and $115, respectively. 

FRC Stock Chart

Looking at 2020 earnings, First Republic Bank smashed earnings expectations in every single quarterly report released in 2020. FRC beat expectations by a margin of $0.12 in the final quarter of 2019, reporting an earnings per share (EPS) of $1.39. For the first quarter of 2020, First Republic Bank stock decreased its EPS to $1.20, but still beat Wall Street's earnings expectations by a decent margin of $0.18. In the second quarter, they reported an EPS of $1.40, beating expectations by a margin of $0.23. In its most recently released quarterly report from October, First Republic Bank boosted its earnings to $1.61 per share. The company also beat expectation by a margin of $0.22. As for First Republic Bank's upcoming earnings report next week, FRC is expected to report an EPS of $1.51 for the fourth quarter of 2020.

First Republic Bank also has a forward dividend of $0.80 and a forward dividend yield of 0.54%.  FRC’s last dividend paid was for $0.20 per share. FRC has consistently increased its dividends since 2013. The company's first dividend payment was for $0.12.

In addition to the bank's stock growth and earnings beats, First Republic Bank performed relatively well in 2020 from a fundamental perspective with its top and bottom line. The company added about $400 million in revenue over the past 12 months, bringing total revenue up to $3.65 billion. First Republic Bank also increased its net income to roughly $1 billion last year, which is $70 million more than it generated in 2019.

However, First Republic Bank stock currently trades at a price-earnings ratio of 26.24, which is very high for a bank stock. Although, it doesn’t necessarily mean that First Republic Bank stock lacks potential to keep growing, value investors are typically looking for a price-earnings ratio closer to 15.00.  Another negative point for the company is its balance sheet, which holds $16.28 billion in debt and $3.72 billion in cash.

Overall, First Republic Bank stock looks to be a solid company from a fundamental viewpoint, but the stock is too overpriced at the moment. You can pick up other bank stock like this blue-chip at a much more attractive value and with much better balance sheets.


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