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Why Is JPMorgan (JPM) Up 1.2% Since the Last Earnings Report?
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It has been about a month since the last earnings report for JPMorgan Chase & Co (JPM - Free Report) . Shares have added about 1.2% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
JPMorgan Q2 Earnings Beat on Loan Growth, Higher Rates
Rising interest rates and loan growth drove JPMorgan’s second-quarter 2017 earnings of $1.82 per share, which easily surpassed the Zacks Consensus Estimate of $1.57. Also, the figure reflects a 17% rise from the year-ago period. Notably, the results included a legal benefit of $406 million.
Solid loan growth and higher interest rates supported net interest income. Further, investment banking fees recorded a rise. Apart from these, results were supported by a fall in provision for credit losses, mainly driven by reserve releases in the Oil & Gas loan portfolio.
As expected, fixed income and equity trading slumped during the quarter. Also, fall in mortgage banking income, due to higher funding costs and decline in mortgage origination volume, was a headwind. Operating expenses reported a rise during the quarter.
The overall performance of JPMorgan’s business segments, in terms of net income generation, was decent. All segments, except Consumer & Community Banking, reported a rise in net income on a year-over-year basis.
Among other positives, credit card sales volume improved 15% and merchant processing volume grew 12%. Commercial Banking average loan balances increased 12% and Asset Management average loan balances rose 9%.
Managed net revenue of $26.4 billion in the quarter was up 5% from the year-ago quarter. Also, it compared favorably with the Zacks Consensus Estimate of $24.8 billion. Rising rates, loan growth and higher auto lease revenues were the primary reasons for the top-line improvement. These were partially offset by lower trading revenues and mortgage banking fees.
Non-interest expenses (on managed basis) were $14.5 billion, a rise of 6% from the year-ago quarter. The increase was primarily due to higher auto lease depreciation, FDIC-related costs and absence of legal benefit recorded in the prior-year quarter.
Improving Credit Quality
As of Jun 30, 2017, non-performing assets were $6.4 billion, down 17% from the year-ago period. Provision for credit losses fell 13% year over year to $1.2 billion, primarily due to reserve releases in Wholesale loan portfolio.
However, net charge-offs were up 2% year over year to $1.2 billion.
Strong Capital Position
Tier 1 capital ratio (estimated) was 14.3% as of Jun 30, 2017 compared with 13.6% as of Jun 30, 2016. Tier 1 common equity capital ratio (estimated) was 12.6% as of Jun 30, 2017, up from 12.0% as of Jun 30, 2016. Total capital ratio came in at 15.9% (estimated) as of Jun 30, 2017 compared with 15.2% as of Jun 30, 2016.
Book value per share was $66.05 as of Jun 30, 2017 compared with $62.67 as of Jun 30, 2016. Tangible book value per common share came in at $53.29 as of Jun 30, 2017 compared with $50.21 as of Jun 30, 2016.
Outlook
For 2017, the company projects NII to increase about $4 billion.
JPMorgan expects operating expenses (excluding legal charges) to be around $58 million.
Management projects average core loan growth to be around 8% in 2017 that will be funded from a strong deposit balance.
NCOs are projected to be around $5 billion (excluding NCOs related to the student loan portfolio write-down in the first quarter), driven by loan growth.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter, while looking back an additional 30 days, we can see even more upward momentum. There have been four moves higher compared to one lower two months ago.
At this time, JPMorgan's stock has a subpar Growth Score of D, however its Momentum is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum based on our styles scores.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Why Is JPMorgan (JPM) Up 1.2% Since the Last Earnings Report?
It has been about a month since the last earnings report for JPMorgan Chase & Co (JPM - Free Report) . Shares have added about 1.2% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
JPMorgan Q2 Earnings Beat on Loan Growth, Higher Rates
Rising interest rates and loan growth drove JPMorgan’s second-quarter 2017 earnings of $1.82 per share, which easily surpassed the Zacks Consensus Estimate of $1.57. Also, the figure reflects a 17% rise from the year-ago period. Notably, the results included a legal benefit of $406 million.
Solid loan growth and higher interest rates supported net interest income. Further, investment banking fees recorded a rise. Apart from these, results were supported by a fall in provision for credit losses, mainly driven by reserve releases in the Oil & Gas loan portfolio.
As expected, fixed income and equity trading slumped during the quarter. Also, fall in mortgage banking income, due to higher funding costs and decline in mortgage origination volume, was a headwind. Operating expenses reported a rise during the quarter.
The overall performance of JPMorgan’s business segments, in terms of net income generation, was decent. All segments, except Consumer & Community Banking, reported a rise in net income on a year-over-year basis.
Among other positives, credit card sales volume improved 15% and merchant processing volume grew 12%. Commercial Banking average loan balances increased 12% and Asset Management average loan balances rose 9%.
Trading Decline Offset by Higher Rates & Loan Growth, Costs Rise
Managed net revenue of $26.4 billion in the quarter was up 5% from the year-ago quarter. Also, it compared favorably with the Zacks Consensus Estimate of $24.8 billion. Rising rates, loan growth and higher auto lease revenues were the primary reasons for the top-line improvement. These were partially offset by lower trading revenues and mortgage banking fees.
Non-interest expenses (on managed basis) were $14.5 billion, a rise of 6% from the year-ago quarter. The increase was primarily due to higher auto lease depreciation, FDIC-related costs and absence of legal benefit recorded in the prior-year quarter.
Improving Credit Quality
As of Jun 30, 2017, non-performing assets were $6.4 billion, down 17% from the year-ago period. Provision for credit losses fell 13% year over year to $1.2 billion, primarily due to reserve releases in Wholesale loan portfolio.
However, net charge-offs were up 2% year over year to $1.2 billion.
Strong Capital Position
Tier 1 capital ratio (estimated) was 14.3% as of Jun 30, 2017 compared with 13.6% as of Jun 30, 2016. Tier 1 common equity capital ratio (estimated) was 12.6% as of Jun 30, 2017, up from 12.0% as of Jun 30, 2016. Total capital ratio came in at 15.9% (estimated) as of Jun 30, 2017 compared with 15.2% as of Jun 30, 2016.
Book value per share was $66.05 as of Jun 30, 2017 compared with $62.67 as of Jun 30, 2016. Tangible book value per common share came in at $53.29 as of Jun 30, 2017 compared with $50.21 as of Jun 30, 2016.
Outlook
For 2017, the company projects NII to increase about $4 billion.
JPMorgan expects operating expenses (excluding legal charges) to be around $58 million.
Management projects average core loan growth to be around 8% in 2017 that will be funded from a strong deposit balance.
NCOs are projected to be around $5 billion (excluding NCOs related to the student loan portfolio write-down in the first quarter), driven by loan growth.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter, while looking back an additional 30 days, we can see even more upward momentum. There have been four moves higher compared to one lower two months ago.
J P Morgan Chase & Co Price and Consensus
J P Morgan Chase & Co Price and Consensus | J P Morgan Chase & Co Quote
VGM Scores
At this time, JPMorgan's stock has a subpar Growth Score of D, however its Momentum is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum based on our styles scores.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.