Seeking Alpha
What is your profession? ×
Long/short equity, momentum, special situations
Profile| Send Message|
( followers)

Overview

JP Morgan Chase (NYSE:JPM) is scheduled to report 3Q 2011 earnings before the bell on Thursday, October 13. The results are typically released at 7:00 a.m. A conference call will follow the release at 9:00 a.m. EST. JP Morgan Chase is the first of 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 (NYSEARCA:XLF), as well as U.S. index futures and other broad market securities. The results will be followed with numbers from Citigroup (NYSE:C) on Monday.

Outliers & Strategy

  • JP Morgan Chase is expected to earn $0.96 per share (range is $0.77 to $1.25) on revenue of $24.34 bln (Source: Yahoo! Finance).
  • At a recent $31.85, JP Morgan Chase is trading at less than 7x trailing earnings, well below the 5-year average, and a steep discount to the S&P 500. The shares are also trading well below book value of $44.77.
  • JP Morgan Chase is now yielding about 3.26% with talk that the bank is looking to raise its payout headed into 2012.

Recent News

  • 09/20: JPMorgan Chase declared a quarterly dividend of $0.25 per share on the outstanding shares.
  • 09/20: Evercore Partners initiated coverage on JP Morgan Chase with an Overweight rating and a $46 price target, based on expectations for above-average results and increased market share. Benzinga.com
  • 09/15: Morgan Stanley lowered its price target on JP Morgan Chase to $56, but maintained an Overweight rating on the shares, based on several factors, including increased market share, valuation, a strong balance sheet, and broad footprint. Benzinga.com
  • 09/13: Stifel Nicolaus recommends investors scoop up shares of JP Morgan Chase following the recent sell-off, calling concerns stemming from the European debt crisis “overblown.” Valuation is also compelling at less than 1.0x tangible book. Barron’s
  • 09/13: Speaking from the Barclays Financial Services Conference, Jes Staley, CEO of JPMorgan Chase & Co.’s Investment Bank, told attendees that market revenue would be down ~30% from the 2Q period, along with lower revenue in the asset management division.

Technical Review

JP Morgan Chase shares recently dipped to $27.85, the lowest level since April, 2008. Since forging that low on October 4, the shares have retaken the 20-Day SMA near $31 – a key level to watch near-term. The next area of overhead resistance is at $33, followed by the 50-Day SMA near $34. Conversely, support is at $30, followed by the recent low near $28. (Chart courtesy of StockCharts.com)

Summary

JP Morgan Chase shares have been hit hard in recent months, stemming from concerns over the European debt crisis, economic softness in North America, and softer revenues in the capital markets segment. Despite these concerns, the sell-side remains upbeat on JP Morgan Chase, due to valuation, market share, a strong franchise, a solid balance sheet, and high dividend yield. With that said, JP Morgan is still seen topping analyst estimates. Anything less would likely be seen as a disappointment to the broader market.

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.