If investing is a game of managing expectations, then count Wells Fargo a winner.
The bank that perhaps has supplanted Goldman Sachs as the most vilified name in finance posted earnings Friday that on the surface looked lousy — subpar earnings per share, revenue that also missed Wall Street expectations by quite a bit, and internals that were at best mixed.
Investors, though, stood up and cheered.
After sliding lower in electronic trading ahead of the opening bell, Wells Fargo popped. Shares were up as much as 2.6 percent in the first hour of trading.
Wells was the beneficiary of a broad rally in bank stocks that came as JPMorgan Chase and Bank of America both beat estimates. However, Wells was an outperformer, with its gains coming against a rise of about 1.6 percent in the KBW Nasdaq Bank Index through the first hour of trading.
Analysts dug beyond into the numbers and found that the quarter wasn't so bad after all. At a time when Wall Street was bracing for what might lie ahead for Wells Fargo, the end results showed that there could be some reason for optimism.
"The quarter was noisy but we believe investors are looking past the noise and looking to the margin improvement which should drive shares higher," analyst Brian Kleinhanzl at Keefe, Bruyette & Woods said in a note to clients.
The numbers come as Wells Fargo seeks to repair steep damage to its reputation as the result of a scandal that came to light in September.
Workers trying to meet aggressive sales goals created some 2 million bogus accounts. Regulators slapped the banks with $185 million in fines, Congress convened investigative hearings, and CEO John Stumpf had to step down. In the meantime, the bank also failed its "living will" test for how it would be unwound in case of a crisis.