JPMorgan JPM, the biggest U.S. bank in terms of total assets, is well positioned to grow, driven by consistent rise in loan demand, higher interest rates, branch expansion efforts and solid asset quality. Further, expanding its reach into lucrative U.S. healthcare payments market with a deal to acquire InstaMed will go a long way in supporting profitability.
However, a slowdown in mortgage banking operation, given the increase in competition and fall in home-buying appetite is a major near-term concern for JPMorgan. Also, dismal investment banking and trading performance will hurt fee income growth to some extent.
Nonetheless, this Zacks Rank #2 (Buy) stock seems like an attractive investment opportunity right now as it has been witnessing solid upward estimate revisions, and has decent price performance amid volatile markets.
Over the past 60 days, the Zacks Consensus Estimate for earnings has increased 1.8% for 2019 and nearly 1% for 2020. Additionally, shares of JPMorgan have rallied 12.2% so far this year, outperforming the industry’s increase of 10.9%.
What Makes the Stock a Solid Pick
Earnings growth: Over the past three to five years, JPMorgan witnessed earnings per share growth of 12.6%. Further, the company’s earnings are projected to grow 11.3% and 6.7% in 2019 and 2020, respectively.
Moreover, JPMorgan has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 3%.
The company’s long-term (three-five years) estimated earnings growth rate of 7% promises rewards for investors in the long run.
Revenue strength: JPMorgan continues to benefit from higher interest rates and loan growth. Further, its plan to open roughly 400 new branches in 15-20 new markets by the end of 2022 will provide additional support. Notably, the company has already made progress on this front, with announcements to open branches in several new regions.
Also, the company announced a deal to acquire InstaMed, which will enable it to expand reach into lucrative U.S. healthcare payments market. All these efforts are expected to further support growth in revenues. The company’s sales growth is projected to be 5.7% for 2019 and 2.5% for 2020.
Encouraging capital deployment plan: JPMorgan’s 2018 capital plan received the Federal Reserve’s approval. Following this, the bank raised its quarterly dividend to 80 cents per share in September 2018, up 42.9% from the prior payout. Moreover, the company has a share repurchase program of up to $20.7 billion in place. These activities reflect its capital strength and commitment toward rewarding shareholders. Given its solid liquidity position and earnings strength, the company should be able to sustain improved capital deployments.
Superior Return on Equity (ROE): JPMorgan’s ROE ratio is 14.23% compared with the industry average of 12.69%. This indicates that the company reinvests more efficiently compared to the industry.
Other Bank Stocks to Consider
Current-year earnings estimates for Citigroup C have been revised 2.4% upward over the past 60 days. Further, the company’s shares have gained 28.9% so far this year. Currently, it carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BankUnited, Inc.’s BKU earnings estimates for 2019 have moved 2.5% upward over the past 60 days. Further, year to date, the company’s shares have rallied 11%. Currently, it carries a Zacks Rank of 2.
Popular, Inc.’s BPOP earnings estimates for 2019 have moved 7% upward over the past 60 days. Also, year to date, the company’s shares have rallied 12.8%. Currently, it carries a Zacks Rank of 2.
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