JPMorgan (NYSE: JPM) stock has gained 21% YTD, as compared to the 17% rise in the S&P500 index. Notably, JPMorgan’s peer Citigroup (NYSE: C) is up 22% YTD. JPM is scheduled to report its fiscal Q2 2024 results on Friday, July 12, 2024. We expect JPMorgan to post mixed results with earnings topping the consensus but revenues marginally missing the mark. The bank outperformed the expectations in the last quarter, with revenues increasing 9% y-o-y to $41.9 billion. It was primarily driven by an 11% gain in the net interest income (including all segments), which generates around 60% of the top line. We expect the NII to drive Q2 results as well. Our interactive dashboard analysis on JPMorgan’s Earnings Preview has more details.

Amid the current financial backdrop, JPM stock has seen extremely strong gains of 70% from levels of $120 in early January 2021 to around $205 now, vs. an increase of about 50% for the S&P 500 over this roughly 3-year period. Admirably, JPM stock has outperformed the broader market in each of the last 3 years. Returns for the stock were 28% in 2021, -13% in 2022, and 28% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for other heavyweights in the Financials sector including V, MA, and BAC, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could JPM see a strong jump?

Our forecast indicates that JPMorgan’s valuation is $208 per share, just above the current market price of around $205.

(1) Revenues expected to miss the consensus

JPMorgan’s revenues grew 23% y-o-y to $158.1 billion in FY2023. It was primarily because of a 34% y-o-y rise in the NII and an 11% increase in the noninterest income.

  • The NII benefited from the acquisition of First Republic Bank, higher net interest margin, and higher revolving balances in card services in 2023. Further, the same momentum continued in the first quarter of 2024 and we expect it to follow in Q2.
  • The noninterest income grew 11% y-o-y to $68.8 billion in 2023. Further, it improved 7% y-o-y to $18.6 billion in Q1. We expect the same trend to continue in Q2.
  • Overall, we forecast JPMorgan’s revenues to remain around $165.8 billion for the full year FY2024.

Trefis estimates JPMorgan’s fiscal Q2 2024 revenues to be around $42.54 billion, marginally below the $42.87 billion consensus estimate.

(2) EPS is likely to edge past the consensus estimates

JPMorgan Q2 2024 adjusted earnings per share is expected to be $4.31 per Trefis analysis, almost 1% above the consensus estimate of $4.26. The bank reported a 32% y-o-y jump in the adjusted net income to $49.6 billion in 2023, mainly due to revenue growth. That said, the bottom line increased just 6% y-o-y to $13.4 billion in Q1. It was because of a 13% rise in the total noninterest expenses. We expect the net income margin to improve in the second quarter. Overall, JPMorgan is likely to report an annual GAAP EPS of $16.42 for the full year 2024.

(3) Stock price estimate is just above the current market price

We arrive at JPMorgan’s valuation, using an EPS estimate of around $16.42 and a P/E multiple of close to 13x in fiscal 2024. This translates into a price of $208, slightly above the current market price of $205.

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year

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