JPMorgan Stock To Beat Consensus In Q4?

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JPMorgan (NYSE:JPM) It is scheduled to report its fiscal Q4 2021 results on Friday, January 14, 2022. We expect JPMorgan to beat consensus estimates for revenue and earnings. Driven by growth in the corporate and investment banking and asset and wealth management businesses, the bank outperformed expectations in the last quarter. However, the above increase was largely offset by a 3% year-on-year decrease in the consumer and community banking unit — the largest segment of the revenue share. We expect the same trend to continue in the fourth quarter.

Our forecast shows that JP Morgan Valuation $172 per share, which is up 3% from the current market price of around $167. Our interactive dashboard analysis JPMorgan earnings preview There is more detail.

(1) Revenue is expected to exceed consensus estimates

JP Morgan earnings $119.5 billion for the full year 2020 – 4% year-over-year, driven primarily by strong growth in the Corporate and Investment Banking segment, partially offset by negative growth in the Consumer and Community Banking business.

  • The corporate and investment banking segment, which includes the sales and trading and investment banking businesses, grew 26% in 2020. This was due to higher trade and underwriting deal volumes. While the segment posted a cumulative growth of 6% in the first nine months of 2021, this was primarily due to growth in investment banking and equity trading revenues. Notably, the FICC (Fixed Income, Currency and Commodity) trading sub-segment suffered a decline of 20% in the same period. We expect the same trend to continue in the fourth quarter.
  • The firm reported a 7% year-on-year decline in the consumer and community segment to nearly $51.3 billion in 2020. This was due to interest rate headwinds, reduction in outstanding loan balances and lower levels of consumer spending. As a result, its revenue share declined from 48% to 43%. While consumer spending levels have recovered somewhat in the first three quarters of 2021, a low interest rate environment and steady demand for new loans remain. Notably, cumulative nine-month revenue declined 2% annually to $37.8 billion. We expect the unit to see some improvement in the fourth quarter, driven by an increase in loan balances.
  • Asset and Wealth Management revenue grew 5% year-on-year in 2020. Growth continued in 2021, with nine-month revenue up 20% year-on-year to $12.5 billion. This was due to strong cumulative net fund inflows and higher net investment valuation gains. We expect fourth quarter results to be on the same lines.
  • Overall, we expect JPMorgan’s revenue for the full year of fiscal 2021 to be approximately $123.1 billion.

Trefis estimates JPMorgan’s fiscal Q4 2021 revenue of about $30.69 billion, up 3% from the consensus estimate of $29.86 billion. We expect growth in investment banking, equity trading and asset and wealth management revenues to drive fourth quarter results.

The Federal Reserve is expected to hike several interest rates in 2022, which will improve banks’ net interest spread. The move is likely to benefit JP Morgan’s core-banking revenues. Also, investment banking and sales and trading are likely to experience higher volumes for a few more months, before normalizing with the economy recovering. Our Dashboard is on JP Morgan earnings Provides more details on the company’s operating segment along with our forecast for FY2022.

2) EPS likely to beat consensus estimates

JPMorgan’s Q4 2021 adjusted earnings per share is expected to be $3.19 per Trefis analysis, about 6% higher than the consensus estimate of $3.00. The bank reported a 21% year-on-year decline in adjusted net income to $27.4 billion in 2020. This was due to a significant increase in provisions for the credit deficit from $5.6 billion to $17.5 billion. That said, JPM has slashed its provisions figure — to $8 billion — in the first three quarters of 2021. As a result, the nine-month cumulative EPS figure increased from $5.10 to $12.05. We expect fourth quarter earnings to remain below year-ago levels, as the provisions figure is unlikely to see a substantial reduction in Q4. Overall, JPMorgan is expected to report adjusted net income of $45 billion and annual EPS of $15.23 for full-year 2021.

(3) The stock price is estimated to be 3% higher than the current market price

we get here JP Morgan Valuation, using an EPS estimate of approximately $15.23 in fiscal year 2021 and a P/E multiplier of above 11x. This translates into a price of $172, which is about 3% higher than the current market price of $167.

Note: P/E multipliers are based on year-end share price and reported (or expected) adjusted earnings for the full year

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