Surprising Results Prove Little Help to PNC Financial (NYSE:PNC)

The last few weeks have been terrific for PNC Financial (NYSE:PNC), which is actually closing in on 52-week high territory. The recent results the company turned in should have been even more fuel on an already roaring fire, but the numbers are slipping a bit as investors get skittish. How such a combination actually works may seem unclear, but a closer look at all the numbers provides surprising insight.

A Win That's Not Quite a Win

The numbers were actually fantastic for PNC Financial; the company brought in earnings per share of $3.26, which not only beat estimates of $2.61, but also represented a 9.76% increase over this time last year. That's good news by any measure, and the revenue figures weren't any slouch either. The company posted revenue of $4.208 billion, which beat estimates of $4.14 billion. Despite that win, the company's revenues are actually down 8.7% from last year's figures.

The company cited solid returns from operations, and that an improving overall economy managed to let the company get some of its credit reserves back, a condition seen at similar operations like JPMorgan Chase (NYSE:JPM). Gains seen from mortgage operations, and improvements in equity markets, also allowed PNC Financial to gain some footing, even as there was a general slowdown in lending overall. The recent sale of the company's stake in BlackRock (NYSE:BLK), which is being put to work in acquiring BBVA USA Bancshares (NYSE:BBVA), isn't likely to have much immediate impact, though could be a helpful point down the road.

Analysts Holding Their Positions

Despite a company that's in 52-week-high territory, the consensus from the analyst community—based on our latest research—shows a cautious stance overall. In fact, it's a stance that hasn't changed much over the last six months. The company is currently rated a “hold”, and has been for that six month period. Six months ago, the company had one “sell” rating, along with nine “hold” and six “buy.” Today, there's still only one “sell” rating, but 12 “hold” and eight “buy”. The bullish side has advanced almost as much as the comparatively bearish, with more analysts getting into the picture, but their opinion split overall.

The price target has been gaining ground as well, after a slip between six and  three months ago reporting. It started off at $122.54 six months ago, then slipped to $121.71. A month ago, however, it shot up to $134.53, and then to $143.47. For the first time in six months, the consensus price target actually represents downside, given the stock currently trades at $156.39 as of this writing. Five separate analysts have revised their price targets upward this month alone, and only one has downgraded the overall rating; Piper Sandler lowered its outlook from “overweight” to “neutral.”

Benefiting From Its Environment

There has been quite a bit of good news for banks in the last few months. While retail banking has been hurt a bit like most other retail operations—when the branch is closed by government mandate, there's only so much that can be done—there have been other opportunities to help drive banks' successes going forward. The drive for new housing in the wake of everything-from-home philosophies has meant great things for mortgage operations, and we've seen plenty of homebuilders benefit from this point as well.

Moreover, trading has hardly slowed in the interim. Thanks to the growth of apps like Robinhood and Stash, and business closures giving employees more time on their hands, more traders have entered the market and fueled gains, a point which is likely to lose some ground as businesses reopen after the worst of the coronavirus restrictions have passed.

PNC's overall fortunes do look sound. After all, the company had solid numbers and recently announced a dividend that now measures $1.15 per share. Companies in trouble don't tend to pay dividends. Yet there's reason to see the overall share price back off a bit; the company is trending toward 52-week-high territory, after all. It's easy to see that some investors might be balking a bit at further buys, thinking that the company is due for a little bit of a retraction when it's that close to its high.

Here, the consensus play may be the best one to follow. Wait a while before placing fresh investment in PNC, and see if the highs are sustainable. If they are, great; given its overall status and solid dividend it's likely worth buying in. If not, your patience will be rewarded with a great new buy-in point in the future.