Financial ETFs In Focus Ahead Of Wells Fargo and JPMorgan Chase Earnings

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Earlier this week, aluminum giant Alcoa (AA) unofficially kicked off the Q2 2013 earnings season – posting both hits and misses. After the closing bell on Monday, the company reported a $119 million second quarter loss due to weak aluminum prices, putting the bellwether’s EPS at a mere 7 cents per share. Alcoa’s EPS did, however, manage to beat analysts’ estimates by one cent. And while Wall Street has been somewhat pessimistic about this earnings season, Monday’s results somewhat managed to lift investor optimism [see 25 Wild ETF Charts From 1H 2013]. 

At the end of this week, two more bellwethers are slated to report their Q2 earnings – JPMorgan Chase (JPM) and Wells Fargo & Co. (WFC).

Megabanks Earnings on Tap

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JPM and WFC Earnings

As talks of Fed tapering continue to dictate the markets, the banking industry has come under the spotlight once again as investors speculate how exactly scaling back the central bank’s massive bond-buying program will affect the sector. And though analysts are mixed as to how exactly banks will perform, earnings expectations are quite low for the industry.

JPMorgan Chase is expected to post Q2 earnings at $1.42 per share; last quarter, the firm reported an EPS of $1.59, which significantly beat expectations. Revenues are estimated to be around $24.8 billion, compared to the previous recording of $25.1 billion. In the last two quarters, JPMorgan has posted worse-than-expected quarterly revenues [see Financials Free ETFdb Portfolio].

For Wells Fargo & Co., analysts are expecting earnings to remain unchanged from last quarter at $0.92 per share. Since 2012, the company has beat earnings estimates each quarter. Revenues are expected to fall slightly from the previous quarter to $21.3 billion; in Q1 of 2013, revenues were reported at $21.3 billion.

For those looking to make a play on these two banking giants, there are several ETFs that offer significant exposure to each company:

  • U.S. Financial Services ETF (IYG)
  • Market Vectors Bank and Brokerage ETF (RKH, B)
  • Financial Select Sector SPDR ETF (XLF, A)
  • KBW Bank Portfolio (KBWB, B)
Financial ETFs Performance Recap

The financials industry has fared quite well thus far in 2013, as bullish momentum continues to lift this corner of the market. Year-to-date, the U.S. Financial Services ETF (IYG) has tacked on more than 20%. Over the trailing 3-month period, the fund has gained nearly 12.5% (data as of 7/7/2013) [see also Select Sector SPDR ETFs Head-To-Head].

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IYG vs SPY

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Disclosure: No positions at time of writing.

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