North America

Earnings Preview: JP Morgan Chase Q3 2017 (JPM)

By: Craig Bowles

Overview

JP Morgan Chase (JPM) is scheduled to report 3Q 2017 earnings before the bell on Thursday, October 12th. 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 $1.66 (range $1.54 to $1.75). (Source: Yahoo! Finance) Consensus was $1.67 three months ago.
  • Revenue: Consensus expectations are for a 0.9% y/y decline to $25.29 bln (range $24.13 bln to $26.19 bln).
  • JPMorgan’s P/E of 14.2 compares to a 5-year average 10.9; Price/Book of 1.5 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 15 Buy, 13 Hold, and 2 Sell ratings. (source: MarketBeat.com)
  • Insiders have sold 25,227 shares the last three months and 1,493,654 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 1.59%. Options are pricing in an implied move of 2.44% off earnings.

Recent News

  • 09/30: Catalysts such as potential tax reforms and interest rate hikes by the fed could push shares of JPMorgan Chase beyond the $100 threshold for the first time in its history, according to a post on Fool.com.
  • 09/26: Deutsche Bank downgraded JPMorgan to Hold from Buy explaining that interest rate hikes may slow net interest income growth and that credit costs may begin to inch up. Also, increased competition in investment banking/trading may erode some of the company’s recent gains, according to a post on CNBC.com.
  • 09/08: Oppenheimer thinks bank stocks are back to trading as bond proxies but sees the valuation of bank stocks, increased profitability, massive buyback authorizations, de-risked balance sheets and modest underlying loan growth outweighing negatives from North Korea, hurricanes and continued interest rate increases, according to a post on Barron’s.com.
  • 08/18: Credit Suisse believes credit quality could be a bright spot for the banks. The typically slow season of July and August in capital markets means a pickup will have to happen in September, according to a post on Barron’s.com.
  • 08/03: The United States Consumer Financial Protection Bureau ordered JPMorgan Chase to pay $4.6 million for failing to provide accurate screening reports on new bank account applicants, according to a post on Fortune.com.
  • 07/22: KBW sees JPM among banks set for an earnings boost if regulatory-relief actions take place, according to Barron’s.com.

Technical Review

JPMorgan’s stock price held up better than most big banks during the early 2016 weakness and is one of the top performers over the past two years. While the past year has had relatively average performance, the stock is making new all-time highs. Financials weighed on the overall market in July and August but have been one of the leaders in September after JPM tested the 200-day moving average. (Chart courtesy of StockCharts.com).

Summary

Strengthening inflation indicators and the Fed’s plan to start winding down its controversial “quantitative easing” strategy suggests banks will have to deal with a new environment. Analyst are split on JPMorgan Chase with 15 Buys and 15 “other” ratings. Following the increased stock buyback program, insider selling has nearly dried up. Earnings have beaten estimates by an average of 21c the past four quarters. Estimize consensus for an EPS of $1.70 on revenue of $25.419 billion compares to analyst consensus of $1.66 on revenue of $25.29 billion.

 

DISCLAIMER:  By using this report, you acknowledge that Selerity, Inc. is in no way liable for losses or gains arising out of commentary, analysis, and or data in this report. Your investment decisions and recommendations are made entirely at your discretion. Selerity does not own securities in companies that they write about, is not an investment adviser, and the content contained herein is not an endorsement to buy or sell any securities. No content published as part of this report constitutes a recommendation that any particular investment, security, portfolio of securities, transaction or investment strategy is suitable for any specific person.