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This Month's Bonus Story
Big Bank Earnings Gave Financials a Lift, But Wall Street Is Still CautiousSubmitted by Jessica Mitacek. Originally Published: 4/22/2026. 
Key Points
- Goldman Sachs, Wells Fargo, Citigroup, and JPMorgan all posted Q1 2026 earnings beats, signaling potential undervaluation across major financial stocks.
- The financials sector has shed nearly 4% year-to-date in 2026 but has rebounded more than 7% over the past month amid strong bank earnings.
- Analysts remain cautious despite the earnings beats, with mostly conservative price targets and low expectations for Federal Reserve rate cuts ahead.
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The financials sector has not been kind to investors this year. Following a strong 2025 that saw it finish third in the index, the group has been the worst performer among the S&P 500’s 11 sectors so far in 2026, posting a year-to-date (YTD) loss of nearly 4% as measured by the Financial Select Sector SPDR Fund (NYSEARCA: XLF).
But over the past month, financials have appeared to turn a corner after posting a gain of over 7%. That momentum can, in part, be attributed to the lead-up to big banks’ earnings week, which kicked off on April 13 when Goldman Sachs (NYSE: GS) reported first-quarter results. For investors monitoring the sector for a potential bounce, here’s what we learned from the premier financial institutions. Goldman Sachs: Earnings Growth Hints at Undervalued SharesGoldman Sachs' Q1 2026 results may be enough to help the 157-year-old investment bank break even for the year. That builds on momentum that has seen GS shares gain more than 16% from their YTD low on March 13 as they rallied into last week's earnings release. The firm reported earnings per share (EPS) of $17.55, above analyst expectations of $15.92, and revenue of $17.23 billion, above forecasts of $16.66 billion. The revenue beat stood out, showing a 14.4% year-over-year (YOY) increase. The earnings beat marked the bank’s 11th consecutive quarter of exceeding analyst estimates, with CEO David Solomon noting in his earnings call comments that EPS, revenue, and net income were all the second-highest in the company’s history. Notably, Goldman Sachs’ Global Banking & Markets segment and its Asset & Wealth Management segment reached record revenues and record assets under management, respectively. Solomon did note near-term headwinds, including geopolitical unrest and uncertainty about how higher energy prices could affect growth. Still, he said the bank “is extremely well-positioned to navigate this current environment.” Goldman Sachs’ earnings are forecast to grow nearly 11% over the next year, from $47.12 per share to $52.07 per share, which makes the stock look increasingly undervalued given its current and projected earnings growth. Big Banks Mirror Goldman’s Lead, Post Notable Earnings BeatsFollowing Goldman Sachs’ success, Wells Fargo & Company (NYSE: WFC), Citigroup (NYSE: C), and JPMorgan Chase & Co. (NYSE: JPM) reported on April 14, with all three posting earnings beats. While only Wells Fargo missed on revenue, the bank still saw top-line growth of 6.4% YOY. Revenue for JPMorgan and Citigroup rose 10% and 14.1% YOY, respectively. For each firm, the earnings beat marked the ninth consecutive quarter of EPS exceeding analyst expectations. More importantly—as with Goldman Sachs—the Q1 beats point to potential undervaluation when those earnings are viewed alongside each stock’s P/E multiple and forecasted earnings growth over the next year:
Wells Fargo: P/E 14.67, expected EPS growth of 16.64% Citigroup: P/E 17.26, expected EPS growth of 25.5% JPMorgan: P/E 17.31, expected EPS growth of 7.29% Citigroup looks particularly undervalued after four of its five core businesses delivered double-digit revenue growth. Management also signaled confidence by repurchasing $6.3 billion of shares in Q1 as part of a $20 billion buyback plan. But like Solomon, Citigroup CEO Jane Fraser warned that the fallout from the Iran war increases the risk that “inflation is now a greater risk to growth and will likely cause central banks to lean towards more restrictive monetary policies.” Wall Street Remains Reserved on FinancialsDespite the earnings beats, analysts remain somewhat cautious on these four bank stocks, assigning mostly conservative price targets. Wells Fargo and Citigroup carry consensus Moderate Buy ratings, but only Wells Fargo has an average 12-month price target implying a double-digit gain from current levels. Expectations for additional rate cuts from the Federal Reserve are low, meaning banks can continue improving net interest margins if rates remain steady. Consumer spending also remains strong, according to numerous banks’ earnings calls. If the earnings season finishes with a clean sweep of beats, it could be the catalyst the financials sector needs to change the narrative for the remainder of 2026. |
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