UBS’ stock (NYSE: UBS) has experienced a decrease of 7% year-to-date, in contrast to the 9% rise in the S&P 500 during the same period. However, the stock price has improved by 4.5% since May 6, outperforming the broader index’s gain of 3.4%. This positive momentum followed the bank’s better-than-expected first quarter results in 2024, surpassing both earnings and revenue estimates. Currently trading at $29 per share, the stock is considered undervalued by 9% based on Trefis’ fair value estimate of $32 for UBS.
Despite the challenging financial landscape, UBS stock has seen significant growth of 100% from $15 in early January 2021 to around $30 currently, outpacing the S&P 500’s 40% increase over the same period. While UBS has demonstrated consistent value growth over the last three years, it has struggled to consistently outperform the market. In 2021, the stock saw returns of 26%, followed by 4% in 2022, and a substantial 66% in 2023. Comparatively, the S&P 500 recorded returns of 27% in 2021, -19% in 2022, and 24% in 2023, showcasing UBS underperformance in 2021. Beating the S&P 500 consistently has proven challenging for individual stocks in recent years, even for prominent players such as JPM, V, MA, GOOG, TSLA, and MSFT. However, the Trefis High Quality Portfolio, comprising 30 stocks, has consistently outperformed the S&P 500 during the same period, fueled by better returns with less risk.
In the first quarter of 2024, UBS reported total revenues of $12.74 billion, marking a 46% year-over-year increase. Revenue growth was observed across all segments, including global wealth management (up 28%), personal & corporate banking (81%), asset management (54%), and investment bank (16%). The uptick in revenues was attributed to both the consolidation of Credit Suisse’s revenues of $3.8 billion and organic growth. Furthermore, a favorable drop in total noninterest expenses as a percentage of revenues resulted in an adjusted net income of $1.76 billion, reflecting a 71% year-over-year increase.
In FY2023, UBS recorded a notable 18% year-over-year increase in net revenues, reaching $40.8 billion. This growth was primarily driven by a 12% rise in the wealth management unit and a significant 96% surge in the personal & corporate banking segment. Additionally, the negative goodwill of $27.75 billion related to the Credit Suisse acquisition substantially bolstered the bottom line. However, higher provisions for credit losses and increased operating expenses partially offset these gains, leading to an adjusted net income spike of over 250% to $27.8 billion.
Looking ahead, UBS is expected to maintain a strong performance in the second quarter and beyond. Revenue estimates for FY2024 point towards a target of $46 billion, with adjusted net income likely to hover around $3.5 billion. This projection sets the stage for an annual GAAP EPS of $1.07, paired with a P/E multiple just below 30x, resulting in a valuation of $32 for UBS. Amid uncertainties in the macroeconomic environment characterized by high oil prices and elevated interest rates, the question remains whether UBS will continue its upward trajectory or face challenges in outperforming the S&P 500 in the coming months.
