North America

Earnings Preview: JP Morgan Chase Q2 2017 (JPM)

By: Craig Bowles

Overview

JP Morgan Chase (JPM) is scheduled to report 2Q 2017 earnings before the bell on Friday, July 14th. The results will be released at approximately 7:00 a.m. ET with a conference call available at JPMorgan Chase Investor Relations to follow at 8:30 a.m. JP Morgan Chase is among the first of the major banks to report each quarter and releases earnings via their web site rather than through the wire services. The earnings reports could have a significant impact in the trading of other names in the financial sector, as well as U.S. index futures and other broad market securities.

Outliers & Strategy

Key Measures:

  • Earnings Per Share (EPS): This is the value that is normally compared with consensus estimates but verbiage is often present. If Earnings Per Share (EPS) Excluding Items is available, that value will compare with consensus estimates.
    • Consensus is $1.60 (range $1.51 to $1.73). (Source: Yahoo! Finance) Consensus was $1.65 three months ago.
  • Revenue: Consensus expectations are for a 0.4% y/y decline to $25.11 bln (range $24.15 bln to $26.18 bln).
  • JPMorgan’s P/E of 14.0 compares to a 5-year average 10.9; Price/Book of 1.4 compares to a 5-year average 1.0; Price/Revenue of 3.5 compares to a 5-year average 2.2; and Dividend yield of 2.1% compares to a 5-year average 2.4%.
  • Analysts view JP Morgan with 18 Buy, 12 Hold, and 2 Sell ratings. (source: MarketBeat.com)
  • Insiders have sold 127,813 shares the last three months and 1,813,849 shares in the past year (source: NASDAQ.com). In June 2017, the share repurchase program was increased to $19.4 billion. June 2016 was $10.6 billion over the next twelve months.
  • JPMorgan Chase shares have a 1-day average price change on earnings of 1.64%. Options are pricing in an implied move of 2.21% off earnings.

Recent News

  • 06/28: Following positive results from the annual stress tests, the Fed approved capital return plans of all 34 banks. JPMorgan Chase raised its quarterly dividend by 6c to 56c and nearly doubled buybacks, according to a post on CNBC.com.
  • 06/20: BofA reiterated an Outperform rating on JPMorgan after attending a meeting with CEO Jamie Dimon who reinforced the belief that peer-leading returns could improve further. The stock is mispricing the rate of change in profitability, according to a post on StreetInsider.com.
  • 06/19: Despite a flattening yield curve, big banks can benefit from higher payouts, relatively low valuations, and better earnings driven by higher rates. KBW warns the “bear flattener” of the yield curve pressures income, according to a post on Barron’s.com.
  • 06/17: JPMorgan Chase and other large lenders are poised to increase dividends by double digits, according to a post on Barron’s.com.
  • 06/13: Bank of America, JPMorgan Chase, Wells Fargo, Citi, and others launched Zelle, a money-transfer service that is built into your mobile banking app and allows you to send money to friends, even if they use a different bank, according to a post on Barron’s.com.
  • 06/06: Morgan Stanley sees financial regulatory reform progress picking up this summer, according to a post on Barron’s.com.

Technical Review

JPMorgan’s stock price held up better than most big banks during the early 2016 weakness and edged above last quarter’s high for an all-time high of $94.51 in July. The big banks as a group haven’t done much since Q1 after leading the Trump rally. Despite this, financial sector strength has offset some weakness from technology and telecom. Balance area support is around $86. (Chart courtesy of StockCharts.com).

Summary

Analysts bullishness remains for JPMorgan Chase as banks continue to benefit from a relatively large spread between fed funds and their prime rate. Jamie Dimon had mentioned a possible special dividend in lieu of stock buybacks but JPM nearly doubled buybacks, instead. Earnings have beaten estimates by an average of 18c the past four quarters. Estimize consensus for an EPS of $1.62 on revenue of $25.221 billion compares to analyst consensus of $1.60 on revenue of $25.11 billion.

 

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