Bank of America (BAC  ) reported Q4 results that came in better than expected in terms of earnings but fell short on revenues. Shares dipped following its release, but in the last week, the bulk of these losses were recovered. The biggest boost to earnings was the company lowering its loss-reserves as defaults were less than expected.

Inside the Numbers

In Q4, Bank of America reported $0.59 per share in earnings which topped analysts' expectations of $0.55. However, this was a 28% drop from last year's Q4. Revenue declined by 10% to $20.2 billion, while analysts were looking for $20.7 billion.

In part, the earnings beat was due to it releasing $828 million in reserves due to lower defaults. If the economy continues to recover as expected, then this could be a big tailwind to earnings over the next year as the company built up its loss-reserves to $11.3 billion in the first three quarters of the year. Two major determinants will be the fate of the fiscal stimulus package and continued vaccinations which will enable the economy to reopen.

In terms of the company's various divisions, trading fell short of expectations with $1.7 billion in revenue, while analysts were looking for $2.1 billion due to weakness in macro products and mortgages. Equities revenue was $1.3 billion which slightly topped the $1.2 billion expectation. However, Bank of America's trading division fell short of the strong performance from peers like JPMorgan (JPM  ) and Goldman Sachs (GS  ).

The banking side was better than expected due to increased consumer demand, resilient loan demand, and a steepening yield curve. While Bank of America has underperformed its more Wall Street-centric peers like Goldman and JPMorgan, it's likely that it will outperform if economic growth starts picking up in the second half of 2021.

Stock Price Outlook

Overall, Bank of America has a 7% gain YTD, following a 15% drop in 2020. Given its large franchise and massive base of small business customers, it is one of the best stocks to play an economic recovery. Additionally, the Federal Reserve's stress tests mean that it is able to restart its $3.2 billion share buyback and $0.18 dividend which should start increasing once again as well.

It's impressive that BAC managed to stay profitable for 2020 despite the rough economic climate, and the buildup of loan-loss reserves. Due to the stimulus, defaults simply haven't spiked. Despite recent gains, Bank of America looks attractive from multiple perspectives. It has a forward p/e ratio of 11, a 2.2% dividend, and 36.5% profit margins. On a technical basis, the stock looks to have successfully retested its breakout and poised to keep climbing higher.