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By: Brendan Gilmartin Vice President, Research & Content

JPMorgan Chase (NYSE:JPM) is scheduled to report 2Q 2013 earnings before the bell on Friday, July 12. The results are typically released at 7:00 a.m. EST with a conference call slated to follow at 8:30 a.m. JPMorgan Chase is the first among the major U.S. financial institutions to report quarterly results. Therefore, the numbers could have a significant impact in the trading of other names in the financial sector, as well as U.S. index futures and other broad market securities.

Outliers & Strategy

  • JPMorgan Chase is expected to earn $1.44 per share (range is $1.35 - $1.63) on revenue of $24.84 bln, up 8.5% from the prior-year period. (Source: Yahoo! Finance)
  • Revenues: Selerity produces the value from the table: "Managed Basis - Total Net Revenue."
  • At a recent $54.83, JPMorgan Chase is now trading at a mere 9.79x trailing earnings, well below the 5-year average. The shares are also trading at a slight premium to book value of $52.02 (as of 03/31/2013).
  • JPMorgan shares have had an average price move of 2.75% off earnings for the past several quarters, while the options market is pricing in a 2.5% change in the share price. Last quarter, both the Futures market and equities appeared to downplay a strong earnings figure ($1.59 vs. $1.38 estimate) as a weaker revenue number offset the solid bottom-line results.

Recent News

07/02: Raymond James upgraded JPMorgan Chase from Outperform to Strong Buy and raised the price target from $55.00 to $64.00, according to a post on Benzinga.com. The firm also raised FY2013 & 2014 EPS estimates on an improving profit outlook.

07/02: Evercore Partners sees JPMorgan earning $1.47 per share for the 2Q period, above the current consensus forecast, according to StreetInsider.com. The firm believes lower credit costs and expenses could be offset by weaker seasonal trading revenues and investment banking. The firm carries an Overweight rating and a $60 price target.

05/21: JPMorgan Chase declared a quarterly dividend of $0.38 per share, an increase from the prior quarterly dividend of $0.30. The shares are now yielding 2.77%.

Technical Review

JPMorgan Chase shares are closing in on the multi-year high of $55.90 on May 30, and are up close to 10% from the June low near $50.00. Ahead of Friday's earnings, the shares appear extended near term, with the Relative Strength Index approaching the overbought 70-level and the recent price action resulting in a potentially bearish "Double-Top" formation. Should earnings fail to meet the high end of Street expectations, there is downside risk to $54.00, followed by the 50-Day SMA near $52.00. Conversely, resistance is at the recent high of $55.90. (Chart courtesy of StockCharts.com)

(click to enlarge)

Summary

JPMorgan Chase shares are at a multi-year high, benefiting from an improving lending backdrop, share repurchases, strengthening economic conditions, stronger credit quality, and a fortress balance sheet. Given the recent strength and the positive sentiment surrounding JPMorgan, the bar is set quite high this earnings period. In order to push the shares beyond the multi-year high near $56.00, look for earnings well above $1.50 per share (consensus is $1.44) with a solid revenue figure. Conversely, a disappointing EPS result is likely to spark a pullback in the shares given the elevated expectations.

DISCLAIMER: By using this report, you acknowledge that Selerity, Inc. is in no way liable for losses or gains arising out of commentary, analysis, and or data in this report. Your investment decisions and recommendations are made entirely at your discretion. Selerity does not own securities in companies that they write about, is not an investment adviser, and the content contained herein is not an endorsement to buy or sell any securities. No content published as part of this report constitutes a recommendation that any particular investment, security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Source: JPMorgan Chase Approaching Multi-Year Highs Ahead Of Q2 Earnings