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Major Banks Report Q1 Earnings

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Zacks Equity Research
·3 min read
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The long-awaited Q1 earnings season has now (unofficially*) arrived, with the releases of some of Wall Street’s biggest banks, as well as a key Consumer Staples company. Market futures are up this morning, eager to erase yesterday’s losses and apparently not impeded by what they’ve seen from earnings reports thus far today.

JPMorgan Chase JPM, a Zacks Rank #3 (Hold) stock, missed expectations in its Q1 results due to massive provisions for credit losses as the economy attempts to bail out small- and medium-sized businesses negatively affected by the coronavirus crisis. The bank reported 78 cents per share for the quarter, down from the $1.70 expected, while revenues of $28.3 billion came in below the $29.0 billion in the Zacks consensus. JPMorgan had averaged a nearly 10% quarterly earnings surprise during the trailing 12 months.

Shining like a beacon in this Q1 report is a 454% spike in coronavirus-oriented loan provisions. To say this is a one-time item may be a little hasty, however; until we know whether the pandemic has subsided enough to get the domestic economy rolling again, our big banks may yet be pressed into service for further provisions. For more on JPM’s earnings, click here.

Zacks Rank #5 (Strong Sell)-rated Wells Fargo WFC also came in light of estimates ahead of the opening bell, posting earnings per share of $0.01, compared with the Zacks consensus $0.22 and $0.60 per share in the year-ago quarter. Revenues of $17.7 billion were beneath the $19.2 billion analysts were looking for and the $19.9 billion reported in Q1 2019. While Q1 will prove challenging for many companies across a wide spectrum of industries, Wells Fargo has only posted one earnings beat in the trailing 4 quarters. For more of WFC’s earnings, click here.

Consumer Staples major Johnson & Johnson JNJ, meanwhile, has outperformed expectations for its Q1, with $2.30 per share beating the consensus estimate of $2.03 and $2.10 reported in the year-ago quarter. It’s trailing 4-quarter average has been for a 4.3% positive earnings surprise, so these results will add to the winning streak. Pre-market, shares are up 3.7% — going a long way toward bringing the stock back to break-even, year to date. This compares with the -14.5% posted thus far in the S&P 500. For more on JNJ’s earnings, click here.

Import Prices for March dropped 2.3%, the biggest decline in more than 5 years. However, it’s still better than the estimated -3.2% analysts were expecting. This fall-off has largely to do with a big decline in fuel prices (-26.8%), particularly petroleum (-27.8%). For petroleum import prices, this is the farthest drop since November 2008, at the start of the Great Recession.

Finally, before we get too excited about an immediate return to economic normalcy, the International Monetary Fund (IMF) this morning has released growth forecasts falling to -3.0% globally, -6.1% in advanced economies and -1.0% for emerging markets. These represent the worst economic growth levels since the U.S. Great Depression in the 1930s.

* According to Zacks Director of Research Sheraz Mian, Q1 earnings season has already begun with reports from key S&P 500 companies.


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