JPMorgan Chase & Co.
) to beat earnings expectations when it reports first-quarter
2013 results before the opening bell tomorrow, Apr 12.
GOLDMAN SACHS (GS): Free Stock Analysis
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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 +2.92% - the difference between the Most
Accurate estimate of $1.41 and the Zacks Consensus Estimate of
$1.37. 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
Drivers of Better-than-Expected Earnings
As capital market activity remained strong during the
January-March period with continued support from the Fed, the
propensity to invest in the market increased. Given the
prevailing low interest rate environment, there was a surge in
demand for financial instruments that are not interest rate
sensitive and offer better returns. As a result, non-interest
revenue sources, primarily trading revenue, should be a strong
support to the top line this quarter.
Though sluggish loan growth will keep interest income under
pressure and increased litigations will raise total expenses, an
uptick in mortgage activity and lesser credit loss provisions
will likely support bottom-line improvement this announcement.
Moreover, rising home prices and falling unemployment have
increased lending through credit cards. As a result, the company
should report better results in its credit card business.
Unlike the fourth quarter of 2012, activities of this banking
giant during the first quarter of 2013 were sufficient to win
analysts' confidence. The Zacks Consensus Estimate for the first
quarter has inched up by a cent to $1.37 per share over the last
7 days as the tendency for an upward estimate revision was more
Other Stocks to Consider
JPMorgan is not the only bank looking up this earnings season.
Here are some other banks you may want to consider as our model
shows these have the right combination of elements to post an
earnings beat this season:
The Goldman Sachs Group Inc.
) has an earnings ESP of +4.80% and carries a Zacks Rank #3. It
is scheduled to report its first quarter results on Apr 16.
Wells Fargo & Company
) has an earnings ESP of +1.15% and carries a Zacks Rank #3. Its
first quarter release is scheduled on the same day as JPMorgan.
The earnings ESP for
Prosperity Bancshares Inc.
) is +1.19% and it carries a Zacks Rank #3. The company is
scheduled to release its first quarter results on Apr 24.
In the banking sector, JPMorgan, which has exposure in almost all
banking businesses, is set to kick off the first quarter earnings
with Wells Fargo. Therefore, the release will be a significant
indicator of performance in the key banking sector.