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Zacks Earnings Trends Highlights: JPMorgan, Citigroup and Wells Fargo
Read MoreHide Full Article
For Immediate Release
Chicago, IL – July 13, 2023– Zacks Director of Research Sheraz Mian says, "2023 Q2 earnings for the S&P 500 index are expected to decline -9.8% from the same period last year on -0.4% lower revenues, with margin declines for the 6th consecutive quarter driving the earnings drop."
Q2 Results to Reflect Stabilizing Earnings Picture
Note: The following is an excerpt from this week's Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
2023 Q2 earnings for the S&P 500 index are expected to decline -9.8% from the same period last year on -0.4% lower revenues, with margin declines for the 6th consecutive quarter driving the earnings drop.
The 2023 Q2 earnings decline would follow the -3.4% decline in 2023 Q1 and -5.4% drop in 2022 Q4. The expectation is for 2023 Q3 earnings to be the last period of declines, with growth resuming from Q4 onwards.
Earnings estimates for Q2 came down as the quarter got underway, though the magnitude of cuts to estimates was notably below what we saw in other recent comparable periods. The -9.8% earnings drop in Q2 today is down from -7.2% at the start of the period.
Looking at the calendar-year picture, total S&P 500 earnings are expected to decline -3.9% on +0.5% higher revenues in 2023. Excluding the Finance sector, full-year 2023 earnings would be down -6.5%, but index earnings would be down only -0.9% on an ex-Energy basis.
For 2023 Q2, S&P 500 earnings are expected to decline -9.8% from the same period last year on -0.4% lower revenues. This would follow the -3.4% decline in index earnings in the preceding period (2023 Q1) and the -5.4% decline in the last quarter of 2022.
In other words, 2023 Q2 is expected to be the third consecutive quarter of declining S&P 500 earnings. The expectation currently is of another earnings decline in Q3 of -1.9%, after which growth turns positive in Q4 and continues in 2024.
As you can see from these quarterly earnings-growth expectations, the long-feared recession doesn't show up in this near-term earnings outlook. A big-picture view of corporate profitability on a long-term basis doesn't leave much room for a recession either.
These growth expectations reflect current bottom-up consensus earnings estimates for the individual S&P 500 companies that, in turn, are based on the estimates from individual sell-side analysts that cover those companies.
Predicting recessions is beyond the core competence of typical equity research analysts. But they do keep a close eye on the evolving business trends for the companies and industries they follow. Analysts maintain elaborate financial models for the companies in their coverage, which allows them to come up with their earnings, revenues, and other estimates.
We at Zacks make it our business to closely monitor how analysts' earnings estimates evolve over time. In fact, our rating system, the Zacks Rank, is based on earnings estimate revisions.
Regular readers of our earnings commentary know that we have flagged a notable stabilization in the estimate revisions trend since the start of 2023 Q2, reversing the persistently negative trend that had been in place for almost a year prior.
Earnings estimates in the aggregate for the S&P 500 index have come down only a touch since the start of April, with several sectors starting to see modest positive estimate revisions. These sectors include Construction, Industrial Products, Autos, Tech, Medical, and Retail.
Hard to tell at this stage if the revisions trend will remain on its recent positive trajectory or revert back to its original negative trend. But it is nevertheless a market-friendly development.
Sector Focus
The big banks dominate the early phase of each reporting cycle, and the Q2 earnings season will be no different, withJPMorgan (JPM - Free Report) , Citigroup (C - Free Report) and Wells Fargo (WFC - Free Report) coming out with their June-quarter results before the market's open this Friday, July 14th.
While Q2 estimates for Citigroup and Wells Fargo have come down, the same for JPMorgan have increased modestly. In terms of year-over-year change, Citigroup's Q2 earnings are expected to be -40.4% below the year-earlier level on -1.7% lower revenues. JPMorgan's Q2 earnings are expected to be +31% above the year-earlier level on +21.0% higher revenues, while the same for Wells Fargo are expected to be up +56.7% and +19.1% from the year-earlier level, respectively.
The Finance sector as a whole is expected to show +9.8% earnings growth in Q2 on +6.9% higher revenues, which would follow the +1.3% earnings growth on +11.5% higher revenues in 2023 Q1.
Within these banks, the core commercial and consumer banking franchises are expected to show improved profitability, partly offset by continued weakness in investment banking and tough comparisons for the trading businesses. Recent commentary from management teams suggests that reserve bookings should be modest in Q2, though commercial real estate exposure will be driving most of that activity.
As you can see above, the sector tracked the broader market earlier in the year, but the emergence of the regional bank crisis in March has weighed on the group ever since. It will be interesting if the coming Q2 earnings reports will help the group close the performance gap to some extent.
Why Haven't You Looked at Zacks' Top Stocks?
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zacks Earnings Trends Highlights: JPMorgan, Citigroup and Wells Fargo
For Immediate Release
Chicago, IL – July 13, 2023– Zacks Director of Research Sheraz Mian says, "2023 Q2 earnings for the S&P 500 index are expected to decline -9.8% from the same period last year on -0.4% lower revenues, with margin declines for the 6th consecutive quarter driving the earnings drop."
Q2 Results to Reflect Stabilizing Earnings Picture
Note: The following is an excerpt from this week's Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
For 2023 Q2, S&P 500 earnings are expected to decline -9.8% from the same period last year on -0.4% lower revenues. This would follow the -3.4% decline in index earnings in the preceding period (2023 Q1) and the -5.4% decline in the last quarter of 2022.
In other words, 2023 Q2 is expected to be the third consecutive quarter of declining S&P 500 earnings. The expectation currently is of another earnings decline in Q3 of -1.9%, after which growth turns positive in Q4 and continues in 2024.
As you can see from these quarterly earnings-growth expectations, the long-feared recession doesn't show up in this near-term earnings outlook. A big-picture view of corporate profitability on a long-term basis doesn't leave much room for a recession either.
These growth expectations reflect current bottom-up consensus earnings estimates for the individual S&P 500 companies that, in turn, are based on the estimates from individual sell-side analysts that cover those companies.
Predicting recessions is beyond the core competence of typical equity research analysts. But they do keep a close eye on the evolving business trends for the companies and industries they follow. Analysts maintain elaborate financial models for the companies in their coverage, which allows them to come up with their earnings, revenues, and other estimates.
We at Zacks make it our business to closely monitor how analysts' earnings estimates evolve over time. In fact, our rating system, the Zacks Rank, is based on earnings estimate revisions.
Regular readers of our earnings commentary know that we have flagged a notable stabilization in the estimate revisions trend since the start of 2023 Q2, reversing the persistently negative trend that had been in place for almost a year prior.
Earnings estimates in the aggregate for the S&P 500 index have come down only a touch since the start of April, with several sectors starting to see modest positive estimate revisions. These sectors include Construction, Industrial Products, Autos, Tech, Medical, and Retail.
Hard to tell at this stage if the revisions trend will remain on its recent positive trajectory or revert back to its original negative trend. But it is nevertheless a market-friendly development.
Sector Focus
The big banks dominate the early phase of each reporting cycle, and the Q2 earnings season will be no different, withJPMorgan (JPM - Free Report) , Citigroup (C - Free Report) and Wells Fargo (WFC - Free Report) coming out with their June-quarter results before the market's open this Friday, July 14th.
While Q2 estimates for Citigroup and Wells Fargo have come down, the same for JPMorgan have increased modestly. In terms of year-over-year change, Citigroup's Q2 earnings are expected to be -40.4% below the year-earlier level on -1.7% lower revenues. JPMorgan's Q2 earnings are expected to be +31% above the year-earlier level on +21.0% higher revenues, while the same for Wells Fargo are expected to be up +56.7% and +19.1% from the year-earlier level, respectively.
The Finance sector as a whole is expected to show +9.8% earnings growth in Q2 on +6.9% higher revenues, which would follow the +1.3% earnings growth on +11.5% higher revenues in 2023 Q1.
Within these banks, the core commercial and consumer banking franchises are expected to show improved profitability, partly offset by continued weakness in investment banking and tough comparisons for the trading businesses. Recent commentary from management teams suggests that reserve bookings should be modest in Q2, though commercial real estate exposure will be driving most of that activity.
As you can see above, the sector tracked the broader market earlier in the year, but the emergence of the regional bank crisis in March has weighed on the group ever since. It will be interesting if the coming Q2 earnings reports will help the group close the performance gap to some extent.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.