JPMorgan Chase & Co.
) to beat earnings expectations when it reports second-quarter
2013 results before the opening bell tomorrow, Jul 12.
Why a Likely Positive Surprise?
Our proven model shows that JPMorgan has the right combination of
two key ingredients to beat earnings.
Positive Zacks ESP:
The earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) for JPMorgan is +2.11% - the difference between the Most
Accurate estimate of $1.45 and the Zacks Consensus Estimate of
$1.42. This indicates a likely positive earnings surprise.
Zacks Rank #2 (Buy):
JPMorgan's Zacks Rank of 2 increases the predictive power of its
ESP. The combination of its Zacks Rank and Earnings ESP makes us
confident of a positive earnings surprise in the to-be-reported
Note that stocks with Zacks Ranks of #1, 2 and 3 have a
significantly higher chance of beating earnings. The Sell rated
stocks (#4 and 5) should never be considered going into an
Expected Earnings Drivers
Cost containment is expected to be the primary driving factor
this quarter. JPMorgan has progressed well with respect to its
cost cutting efforts through workforce reduction announced
earlier this year. It planned to axe as many as 17,000 jobs,
including 13,000-15,000 positions in mortgage banking, by the end
of 2014. Mortgage banking job cuts will in particular be
reflected in JPMorgan's expenses for the quarter.
Moreover, top-line growth is expected to be significant primarily
on higher trading revenues. As capital market activities
witnessed improvement during the April-June period with continued
support from the Fed, the propensity to invest in the market
Also, in a persisting low interest rate environment, trading
activities for financial instruments that are not interest rate
sensitive and offer better returns have increased. As a result,
trading revenue should strongly support the top line this time
Though we don't expect any significant improvement in interest
income due to sluggish loan growth, an uptick in mortgage
activity should make up the shortfall.
Another major contributor to the bottom line should be lower
provision for loan loses due to overall macroeconomic
improvement. Additionally, we expect continued improvement in
asset quality trends - including declines in net charge-offs
(NCOs) and nonperforming assets (NPAs).
Similar to the first quarter, activities of this banking giant
during the second quarter were sufficient to win analysts'
confidence. The Zacks Consensus Estimate for the second quarter
has inched up by a cent to $1.42 per share over the last 7 days
on an obvious tendency for upward estimate revision.
Other Stocks to Consider
JPMorgan is not the only bank looking up this earnings season.
Here are some other banks you might consider as our model shows
the right combination of elements in these to result in an
Wells Fargo & Company
) has an earnings ESP of +1.09% and carries a Zacks Rank #3. Its
second quarter release is scheduled on the same day as JPMorgan.
Fifth Third Bancorp
) has an earnings ESP of +2.27% and carries a Zacks Rank #3. It
is scheduled to report second quarter results on Jul 18.
The earnings ESP for
) is +0.86% and it carries a Zacks Rank #3. The company is
scheduled to release second quarter results on Jul 15.
In the banking sector, JPMorgan, which has exposure in almost
all banking businesses, is set to kick off the second quarter
earnings with Wells Fargo. Therefore, the release will be a
significant indicator of performance in the key banking
CITIGROUP INC (C): Free Stock Analysis Report
FIFTH THIRD BK (FITB): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
WELLS FARGO-NEW (WFC): Free Stock Analysis
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