JPMorgan Chase & Co.
) will issue its third-quarter 2013 results tomorrow, Oct 11,
before the market opens.
FIFTH THIRD BK (FITB): Free Stock Analysis
HUNTINGTON BANC (HBAN): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
WELLS FARGO-NEW (WFC): Free Stock Analysis
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In the last quarter, it delivered a 10.3% positive earnings
surprise on the back of lower loan loss reserves and improved top
line. This represented the sixth straight quarter of positive
earnings surprise. Will JPMorgan be able to keep the earnings
streak alive? Let's see how things have shaped up for this
Factors to Influence 3Q Results
The banking giant is negotiating a potentially massive settlement
of criminal and civil charges with the Department of Justice,
regulators and other authorities over allegations involving bad
mortgages. The potential cost of the settlement is about $11
billion, the largest bank fine in U.S. history. The extent
of impact that the settlement will have on JPMorgan's
third-quarter earnings depends on its legal reserves in the
However, continued cost containment through workforce reduction
is expected to support the bottom line. It has plans to axe as
many as 17,000 jobs, including 13,000-15,000 positions in
mortgage banking, by the end of 2014.
Though we don't expect any significant improvement in interest
income due to sluggish loan growth and a persistent low interest
rate environment, an uptick in mortgage activity should make up
Moreover, higher trading revenues and steadily improving
investment banking should continue to support top-line growth.
Unlike the second quarter, this banking giant failed to impress
analysts with its level of activities. In fact, the concern over
the potential settlement forced many analysts to significantly
lower their third-quarter earnings estimates. The Zacks Consensus
Estimate for the third quarter has moved down by a couple of
cents to $1.29 per share over the last 7 days, as the tendency
for a downward estimate revision was more obvious.
Our proven model does not conclusively show that JPMorgan is
likely to beat the Zacks Consensus Estimate in the third quarter.
That is because a stock needs to have both a positive Earnings
ESP and a Zacks Rank #1 (Strong Buy) or at least 2 or 3 for this
to happen. Unfortunately, this is not the case here as elaborated
Negative Zacks ESP:
The Earnings ESP for JPMorgan is -2.33%. This is
because the Most Accurate estimate stands at $1.26 while the
Zacks Consensus Estimate is higher at $1.29.
JPMorgan's Zacks Rank #3 (Hold) however increases the predictive
power of ESP. That said we also need to have a positive ESP to be
confident of an earnings surprise call.
Stocks to Consider
Here are a couple of stocks you may want to consider, as our
model shows that these have the right combination of elements to
post an earnings beat this quarter:
Fifth Third Bancorp
) has an earnings ESP of +4.55% and carries a Zacks Rank #3. It
is scheduled to report third quarter results on Oct 17.
The earnings ESP for
Huntington Bancshares Inc.
) is +17.65% and it carries a Zacks Rank #3. The company is
scheduled to release third quarter results on Oct 17.
In the banking sector, JPMorgan, which has exposure in almost all
banking businesses, will kick off the third-quarter earnings
Wells Fargo & Company
). Therefore, the release will be a significant indicator of
performance in the key banking sector.