By: Brendan Gilmartin
JPMorgan Chase (NYSE:JPM) is scheduled to report 1Q 2014 earnings before the bell on Friday, April 11. 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 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 and Strategy
- Earnings Per Share: In most of the historical extractions, EPS was the value that compared with consensus estimates. The only exceptions are several instances where proximity verbiage was present.
- The current Street estimate is $1.41 per share (Source: Yahoo Finance). Given the magnitude of the recent run-up in JPMorgan shares (up more than 10% since early February), look for a figure closer to the high estimate of $1.55 in order to sustain the upward momentum.
- Revenues: The current Street estimate is $24.55 bln, a 5.00% decrease from the year-ago period.
- The options market is currently pricing in a 2.5% move off earnings.
- Sentiment surrounding JPMorgan remains relatively high, particularly in the wake of the analyst meeting back on February 25, whereby CFO Marianne Lake presented details on the balance sheet and the bank's strong fundamental position, along with several reasons why the shares were undervalued.
- 04/04: Macquarie Research upgraded JPMorgan to Outperform from Neutral and increased the price target from $62 to $68, according to a post on Benzinga.com. The firm cited the recent buyback program, valuation and an improving business mix as factors supporting the positive outlook.
- 03/26: JPMorgan raised its quarterly dividend to $0.40 per share (up from $0.38), effective the second quarter of 2014 and authorized a share repurchase plan totaling $6.5 billion. The dividend yield is 2.68%.
- 03/19: JPMorgan reached an agreement to sell its physical commodities business to Mercuria Energy Group Ltd for $3.5 billion.
- 03/06: Wells Faro reiterated an Outperform rating on JPMorgan with a price range of $63 - $66, according to StreetInsider.com. The firm cited long-term profit targets, stock buybacks and increased capital to shareholders.
JPMorgan Chase shares have been on a tear over the past several months, touching a multi-year high, ahead of the 1Q earnings release. Given the recent run-up, look for earnings to exceed the high end of Street estimates (consensus is $1.51/high number on the Street is $1.55) in order to extend the advance and carry the shares back above the $61 level. Flat to weaker than expected results could drag the shares to initial support near $59, followed by $58.00 - just above the 50-day SMA. (Chart courtesy of StockCharts.com).
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 recent 52-week high near $61.10, look for earnings well above $1.50 per share (consensus is $1.41) with a solid revenue figure. Conversely, a disappointing EPS result is likely to spark a pullback in the shares given the elevated expectations.
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