After the report, Wall Street’s attention turned to the other major banks, particularly Bank of America (BAC), Citigroup (C) and Goldman Sachs (GS), trying to glean some information on how these stocks will perform when they report their earnings next week. All three of stocks sold off along with JPM, to the tune of 5%, 5% and 3% respectively.
Scheduled date for earnings release:
Citigroup – October 17
Goldman Sachs – October 18
Bank of America – October 18
Investors can look to history for help in predicting the price movements for these bank stocks. JPM sold off in four of the last five earnings releases (the stock was basically unchanged after the July 2011 report.) In each of the previous four reports, the other three bank stocks reviewed here also sold off in the day or two following the JPM report.
What happened after each report is instructive. Looking at the 4th quarter 2010 and first quarter 2011 JPM reports, Goldman Sachs continued to sell off. The same was true for Bank of America. Both stocks were appreciably lower two weeks after the JPM miss in these recent quarters.
But Citigroup did not perform in tandem with JP Morgan. Shares of Citigroup fell on the day of the JPM report, but instead of continuing to decline, recovered in price. A miss by Morgan was actually a positive for Citigroup. Previous quarters are less conclusive for the other stocks, but Citigroup showed a recovery after a post-JPM report decline in each of the last five quarters.
A few quarters is not a valid statistical sample, and each company has its own issues that may affect the stock price, along with external factors. But what does recent history tell us? Buy Citigroup now, after the drop. And stay away from Goldman and BAC.