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Market Update

Earnings on Tap: J.P. Morgan Chase

The first of the big banks to report earnings may surprise positively, again.

 J.P. Morgan Chase (JPM) reports first-quarter earnings early Wednesday in an announcement that may set the tone for the rest of the big financials.

A consensus of Wall Street analysts forecasts the firm to post earnings per share of $1.16, rising from $0.74 in the prior-year quarter, though J.P. Morgan usually tops Street estimates--having done so consecutively in the past four quarters.

The division of top- and bottom-line results across various verticals like investment banking, equity markets and the credit portfolio is likely to be in focus, with delinquencies and new loans especially analyzed.

While J.P. Morgan does not give earnings guidance, its March move to hike its dividend and announce a share buyback is seen as a definite signal of improvement in various business lines.

Investors will look for management insights into various regulatory issues, and litigation issues may also be under focus after the bank said in a February SEC filing that potential legal losses could be $4.5 billion above established reserves for litigation.

J.P. Morgan shares have traded in the 52-week range of $35.10-$48.30, and at a current market price of $46.60, Morningstar analyst Jaime Peters thinks the stock is undervalued compared with her $61 fair value estimate, given its "fortress balance sheet," ability to hold more capital even during times of crisis, and decent return on equity.

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