Wells Fargo Embarks on an Acquisition Spree

Wells Fargo & Company (WFC) is on an acquisition spree. Its insurance unit, Wells Fargo Insurance Services, has acquired JFK Consulting Group LLC, an employee benefits brokerage and consulting firm located in Overland Park, Kansas. The acquisition closed on November 29, 2010. Terms of the transaction were not disclosed. The deal would help Wells Fargo Insurance to strengthen its presence in Kansas.

JFK Consulting Group provides employee benefit brokerage and consulting services to a large variety of customers, including small and mid-market fully-insured plans, large self-funded corporate plans, public sector employers, and association plans. The company serves customers primarily in Kansas and Missouri.

Last week, the company also announced the acquisition of Prestige Professional Plans. Based in Dayton, Ohio, the acquired entity is an employee benefits insurance brokerage firm. Wells Fargo closed the acquisition on December 1, 2010, but the requisites of the transaction were not disclosed.

Wells Fargo Insurance Services is the fifth largest insurance brokerage in the world and the largest bank-owned insurance brokerage in the U.S. with more than 200 offices in 37 states. The company has 9,200 insurance professionals who place more than $16 billion of risk premiums with experience in property, casualty, benefits, international, personal lines, and life products in it.

Fourth Quarter Earnings and Estimate Revision Trends

Wells Fargo is scheduled to release its fourth 2010 earnings on January 19, 2011. Besides Wells Fargo, the other biggies who are scheduled to report next week include Citigroup Inc. (C) (January 18), Goldman Sachs Group Inc. (GS) (January 19) and Bank of America Corp. (BAC) (January 21).

Currently, Zacks Consensus Estimates for Wells Fargo are 61 cents for the fourth quarter and $2.22 for full-year 2010. Over the last 7 days, 3 of the 25 analysts covering the stock have increased their estimates for the fourth quarter and full-year 2010, while none of them made any downward revision.

We believe with its diverse geographic and business mix, Wells Fargo is well positioned compared to its peers. The Wachovia acquisition and the demise of some smaller players helped it garner a larger share in the mortgage markets. Yet, the recent financial regulations are expected to have a negative impact on both top- and bottom-line results of the company.

We maintain our long-term Neutral recommendation on Wells Fargo. Also, the company currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.