JPMorgan Chase & Co. (JPM) is scheduled to report its first-quarter results on April 12. Wall Street expects the bank to post higher revenue and earnings in the first quarter. With interest rates at their highest level in 22 years, investors would be interested to know how it has impacted the banks' financial performance.
With JPM’s earnings expected shortly, I have discussed why waiting for an opportune entry point in the stock could be wise.
For the first quarter, JPM’s EPS and revenue are expected to increase 0.6% and 8.8% year-over-year to $4.13 and $41.72 billion, respectively. The company has a solid earnings history, beating the consensus estimate in three of the trailing four quarters. Fiscal 2023 was a record-breaking year for the bank, as its net income and net interest income set new records.
In a statement, JPM’s CEO Jamie Dimon, said, “The U.S. economy continues to be resilient, with consumers still spending, and markets currently expect a soft landing. It is important to note that the economy is being fueled by large amounts of government deficit spending and past stimulus. This may lead inflation to be stickier and rats to be higher than markets expect.”
For fiscal 2024, JPM expects net-interest income excluding markets of about $88 billion, which is higher than analysts’ estimates of $86.50 billion. KBW analyst Chris McGratty expects the bank to boost its net interest income forecast to $91.10 billion from $90 billion, while the analyst consensus estimate is $90.70 billion.
JPM’s stock has gained 14.6% over the past three months and 54.7% over the past year to close the last trading session at $197.45.
Here’s what you might want to consider ahead of its upcoming earnings release:
Mixed Financials
JPM’s net income for the fourth quarter ended December 31, 2023, declined 15.5% year-over-year to $9.31 billion. In addition, its EPS came in at $3.04, representing a decrease of 14.8% year-over-year. Its return on common equity (ROE) was 12%, compared to 16% in the year-ago quarter. In addition, its provision for credit losses increased 20.7% year-over-year to $2.76 billion.
On the other hand, its total net revenue – reported increased 11.7% year-over-year to $38.57 billion. The company’s net interest income rose 19.1% over the prior-year quarter to $24.05 billion. Its CET1 ratio was 15%, compared to 13.2% in the prior-year quarter.
For the fiscal year ended December 31, 2023, JPM’s total net revenue rose 22.9% year-over-year to $158.10 billion. Its net interest income increased 33.8% over the prior-year period to $89.27 billion. The company’s net income increased 31.5% year-over-year to $49.55 billion. Also, its EPS came in at $16.23, representing an increase of 34.2% year-over-year. In addition, its return on common equity (ROE) was 17%, compared to 14% in the year-ago quarter.
On the other hand, its provision for credit losses rose 45.9% year-over-year to $9.32 billion.
Mixed Analyst Estimates
Analysts expect JPM’s EPS for fiscal 2024 to decline 1.9% year-over-year to $15.92. Its revenue for fiscal 2024 is expected to increase 3.1% year-over-year to $162.98 billion. Its EPS and revenue for fiscal 2025 are expected to increase 1.7% and 0.4% year-over-year to $16.19 and $163.64 billion, respectively.
High Profitability
In terms of the trailing-12-month net income margin, JPM’s 33.94% is 43.9% higher than the 23.59% industry average. Likewise, its 16.89% trailing-12-month Return on Common Equity is 54.5% higher than the industry average of 10.94%. Furthermore, the stock’s 1.28% trailing-12-month Return on Total Assets is 17.7% higher than the industry average of 1.09%.
Stretched Valuation
In terms of forward Price/Sales, JPM’s 3.49x is 39.9% higher than the 2.49x industry average. Its 1.73x forward Price/Book is 66.9% higher than the 1.04x industry average. Additionally, its 3.10x forward non-GAAP PEG is 135.5% higher than the 1.32x industry average.
POWR Ratings Reflect Uncertainty
JPM has an overall rating of C, equating to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. JPM has a D grade for Value, consistent with its stretched valuation. Its stock is trading below its 10-day moving average but above its 200-day moving average, justifying its C grade for Momentum.
It has a C grade for Sentiment, in sync with its mixed analyst estimates.
JPM is ranked #2 out of 9 stocks in the Money Center Banks industry. Click here to access JPM’s Growth, Stability, and Quality ratings.
Bottom Line
Despite the challenging operating environment, JPM’s earnings and revenue are expected to beat analyst estimates in the first quarter. The bank’s fiscal 2024 prospects appear promising due to the higher-than-expected net interest income forecast. While deal-making shows signs of picking up, the timeline for normalizing M&A activity remains uncertain.
Moreover, the central bank’s three interest rate cuts expected this year will likely decrease the bank’s net interest income compared to last year. Taking out the strong loan growth expected in Card, the bank expects loan growth to be muted this year.
Given the uncertainty surrounding the banking sector and JPM’s mixed momentum and sentiment, it could be wise to wait for a better entry point in the stock.
How Does JPMorgan Chase & Co. (JPM) Stack Up Against Its Peers?
JPM has an overall POWR Rating of C, equating to a Neutral rating. You may check out these A and B-rated stocks within the Foreign Banks industry: Banco Macro S.A. (BMA), Banco Santander, S.A. (SAN), and Nedbank Group Limited (NDBKY). For exploring more Buy-rated Foreign Banks stocks, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
JPM shares rose $0.54 (+0.27%) in premarket trading Monday. Year-to-date, JPM has gained 17.48%, versus a 9.41% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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