Earnings season has begun, and on Friday JPMorgan Chase will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way you'll be less likely to make an uninformed, knee-jerk decision.
As a key financial stock in the Dow Jones Industrial Average , JPMorgan has held up reasonably well in the aftermath of the financial crisis, but it has also suffered some high-profile problems, most notably the infamous "London Whale" trading debacle that cost the bank billions of dollars. Can the JPMorgan stay on the road to a full recovery? Let's take an early look at what's been happening with JPMorgan over the past quarter and what we're likely to see in its quarterly report.
Stats on JPMorgan
Analyst EPS Estimate
Change From Year-Ago EPS
Change From Year-Ago Revenue
Earnings Beats in Past 4 Quarters
Source: Yahoo! Finance.
Can you bank on JPMorgan this quarter?
In recent months, analysts have gotten a lot more bullish on JPMorgan's earnings prospects. They've boosted their earnings estimates for the just-ended quarter by a nickel per share and raised their full-year 2013 projections by an even more substantial $0.17 per share. The stock has performed well in response, with a 10% gain since early January.
JPMorgan has grown much healthier since the days of the financial crisis. In JPMorgan's stress test results last month, the bank got approval from the Federal Reserve to boost its dividend by more than 25% and buy back $6 billion in shares in the next year. In a minor setback, the Fed's approval was conditional on the bank's improving its capital plan to strengthen its planning procedures. Yet JPMorgan is still well ahead of Bank of America and Citigroup in their respective recoveries. For their part, B of A and Citigroup chose not to pursue a dividend increase despite their greatly improved capital conditions, leaving their investors stuck at a $0.01 per-share quarterly payout.
JPMorgan has been doing its best to put its past difficulties behind it. Earlier this month, the bank had the bulk of the claims against it thrown out of court in connection with mortgage-backed securities that JPMorgan had sold to European bank Dexia. It also came to a settlement in the MF Global case worth more than $500 million, which will go a long way toward restoring customers' lost account balances in the debacle. Even with ongoing liability from its acquisition of Bear Stearns in 2008, JPMorgan has moved ahead in reducing its potential outlays in the future.
Perhaps the biggest liability break came from the dismissal of lawsuits surrounding last year's LIBOR scandal. Although JPMorgan would likely have shared liability with Bank of America, Citigroup, and a host of other LIBOR-setting banks, its share of potential damages of $176 billion from private suits could have left JPMorgan reeling.
In JPMorgan's quarterly report, take some time to look past the headlines and focus on the performance of the bank's various businesses. Last quarter, deposits, mortgage originations, credit card sales, and asset management loan balances all posted strong rises, and if those trends continue, then so should JPMorgan's record of share price advances.
With big finance firms still trading at deep discounts to their historic norms, investors everywhere are wondering if this is the new normal or if finance stocks are a screaming buy today. The answer depends on the company, so to help you figure out whether JPMorgan is a buy today, I invite you to read our premium research report on the company. Click here now for instant access!
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The article JPMorgan Earnings: An Early Look originally appeared on Fool.com.
Fool contributor Dan Caplinger owns warrants on JPMorgan Chase and Bank of America. You can follow him on Twitter @DanCaplinger. The Motley Fool owns shares of Bank of America, Citigroup, and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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