Earnings Preview: Outlook mixed into JPMorgan's Q4 results

theflyonthewall.com

JPMorgan (JPM) is scheduled to report Q4 earnings before the open on Wednesday, January 16, with a conference call scheduled for 9:00 am ET. JPMorgan is a bank that engages in investment and commercial banking, as well as other financial services. EXPECTATIONS: Analysts are looking for EPS of $1.16 on revenue of $24.42B, according to First Call. The consensus range for EPS is 98c-$1.29 on revenue of $23.05B-$26.55B. LAST QUARTER: JPMorgan reported Q3 EPS of $1.40 against estimates for $1.21, on revenue of $25.15B against estimates for $24.53B. Last quarter the bank reported that the credit metrics of its mortgage banking business had improved modestly, enabling it to lower its related loan loss reserves by $900M. However, JPMorgan added that it expected to see high default related expenses for awhile longer. The credit trends in the bank’s credit card portfolio continued to improve, and its capital reserves increased. Investment banking fees jumped 38% compared with the same period in 2011, but fixed income and equity markets revenue was flat. On November 8, the bank announced that it had received permission from the Fed to buy back up to $3B of its stock in 1Q13. On the legal front, the bank agreed on November 16 to pay $297M to settle charges by the SEC that the bank and its Bear Stearns subsidiary had misled investors in mortgage-backed securities that they issued. On December 4, JPMorgan CFO Marianne Lake said the bank’s mortgage business was benefiting from low interest rates, while it could offset the pressure on its net interest margin through net interest income. It also said its Q4 mortgage banking origination levels would be at or above Q3 levels, while its total quarterly net charge-offs would come in below $600M. On January 9, the bank said that it expected to take a $700M pre-tax charge for Q4 related to the settlement of improper foreclosure charges. STREET RESEARCH: On January 3, Sterne Agee upgraded the bank’s stock to Buy from Neutral, due to improved unit performance in large corporate/middle market lending and mortgage banking, improving credit quality, respectable loan growth, and its dominant market share position. Conversely, on January 4, Goldman Sachs lowered its rating on JPMorgan to Buy from Conviction Buy, citing what it sees as a lack of earnings catalysts, and relative valuation. Goldman had a $52 price target on the stock. PRICE ACTION: Over the last three months, JPMorgan’s stock has risen almost 9% to above $46, after reaching a trough of ~$39 in mid-November.

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