JPMorgan Chase & Co.
) prepares to release its fourth-quarter 2012 results before the
opening bell tomorrow, Wednesday, Jan 16.
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In the last quarter, it delivered a 15.7% positive earnings
surprise on the back of a marked improvement in capital market
activity and healthy mortgage business. This represented the
third straight quarter of positive earnings surprise. Let's see
how things are shaping up prior to the announcement.
Factors to Consider this Quarter
While capital market activity remained strong, investors were a
tad cautious in terms of investments due to the presidential
election and the uncertainty related to the fiscal cliff during
the quarter. As a result, non-interest revenue sources should not
be a strong support to the top line. Also, higher litigation
expenses may keep total expenses high.
Though an uptick in mortgage activity and lesser credit loss
provisions are expected to act as tailwinds, sluggish loan growth
in a low interest rate environment and the resultant pressure on
the top line may restrict bottom-line improvement this
Unlike the third quarter, activities of this banking giant during
the final quarter of the year were not enough to win analysts'
confidence. The Zacks Consensus Estimate for the fourth quarter
has moved down by a cent to $1.20 per share over the last 7 days
as the tendency for a downward estimate revision was more
Our proven model does not conclusively show that JPMorgan is
likely to beat the Zacks Consensus Estimate in the fourth
quarter. That is because a stock needs to have both a positive
Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1
(Strong Buy) or at least Zacks Rank #2 (Buy) or Zacks Rank #3
(Hold) for this to happen. Unfortunately this is not the case
here as elaborated below.
Negative Zacks ESP:
This is because the Most Accurate estimate stands at $1.17
while the Zacks Consensus is higher at $1.20. This results in a
difference of negative 2.5%.
Zacks Rank #3 (Hold):
JPMorgan's Zacks Rank of 3, however, increases the predictive
power of ESP. That said we also need to have a positive ESP to be
confident for an earnings surprise call.
Other Stocks to Consider
Here are some other companies you may want to consider on the
basis of our model which shows that they have the right
combination of elements to post an earnings beat this quarter:
The Goldman Sachs Group Inc.
) has Earnings ESP of positive 1.78% and carries a Zacks Rank #3
(Hold). It is scheduled to report its fourth quarter results on
Fifth Third Bancorp
) will release its fourth quarter results on Jan 17. It has
Earnings ESP of positive 2.38% and holds a Zacks Rank #2 (Buy).
SunTrust Banks Inc.
) has Earnings ESP of positive 4.92% and carries a Zacks Rank #3
(Hold). It is scheduled to release its fourth quarter results on
JPMorgan, with exposure in almost all banking businesses, is the
second among the banking big shots to report fourth-quarter
earnings. Therefore, the release is going to be a significant
indicator of performance in the key banking sector.
Wells Fargo & Company
) was the first mega bank to kick-start the fourth-quarter
About Earnings ESP
Would you like to own more stocks likely to beat their next
earnings report? And avoid stocks likely to disappoint?
If yes, then it's time you learn about the Earnings ESP score
available on Zacks.com.