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Zacks Earnings Trends Highlights: JPMorgan and Wells Fargo
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For Immediate Release
Chicago, IL – October 12, 2018 – Zacks Director of Research Sheraz Mian says, “For Q3 as a whole, total earnings are expected to be up +17.8% from the same period last year on +7.1% higher revenues, the 6th time in the last 7 quarters of double-digit earnings growth.”
Bank Earnings in the Spotlight
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:
Bank stocks have struggled this year despite the group’s favorable earnings picture. For the September quarter, total bank industry earnings are expected to be up +9.5% from the same period last year on +3.6% higher revenues.
For the Finance sector as a whole, total Q3 earnings are expected to be up +29.3% on +3.1% higher revenues. This would follow the sector’s +21.5% earnings growth on +7.6% higher revenues in 2018 Q2.
For Q3 as a whole, total earnings are expected to be up +17.8% from the same period last year on +7.1% higher revenues, the 6th time in the last 7 quarters of double-digit earnings growth.
Q3 earnings growth is expected to be in double-digits territory for 10 of the 16 Zacks sectors, with Energy, Finance, Construction, Basic Materials and Technology sectors with the strongest growth and Conglomerates and Autos expected to experience modest earnings declines.
Estimates for Q3 came down as the quarter got underway, in contrast to the positive revisions trend that we have been experiencing in the comparable periods of the last three earnings seasons. This revisions trend is in-line with the long-run historical trend (beyond the last three quarters).
The Q3 earnings season has gotten underway already, with results from 22 S&P 500 members already out. It is premature to draw any conclusions from the results thus far, but they are relatively on the weaker side relative to what we had seen from the same group of 19 index members in other recent periods.
For the small-cap S&P 600 index, total Q3 earnings are expected to be up +20.5% from the same period last year on +7.4% higher revenues. The Finance sector, which is an even bigger earnings contributor to the small-cap index compared to the S&P 500 index, is expected to see +56.8% higher earnings on +7.4% higher revenues.
For full-year 2018, total earnings for the S&P 500 index are expected to be up +20.6% on +6.4% higher revenues. For full-year 2019, total earnings are expected to be up +9.9% on +5.2% higher revenues.
The implied ‘EPS’ for the index, calculated using current 2018 P/E of 18.3X and index close, as of October 9th, is $157.61. Using the same methodology, the index ‘EPS’ works out to $173.17 for 2019 (P/E of 16.6X). The multiples for 2018 and 2019 have been calculated using the index’s total market cap and aggregate bottom-up earnings for each year.
Bank stocks have perked up a bit lately on rising interest rates, but the industry has struggled this year on persistent worries about the shape of the yield curve, trends in loan portfolios and trading volumes and the duration of the current economic cycle. With the yield curve starting to steepen in recent days, some of these worries have started easing. But given a number of previous ‘false dawns’, bank stock investors are justifiably skeptical of the staying power of recent interest rate moves.
JPMorgan (JPM - Free Report) , which kick-starts the Q3 earnings season for the Finance sector on October 12th, is expected to report +14% higher earnings on +7.4% higher revenues. The bank’s Q3 EPS estimates have come down modestly since the quarter got underway, with the current $2.25 per share estimate down 4 cents over the past month; not a big decline, but a decline nevertheless. Estimates for Wells Fargo (WFC - Free Report) , which reports the same day as JPMorgan, have remained stable over the same time period, likely reflecting Wells’ limited exposure to the capital market business, which has been a source of weakness for the major banks.
As with JPMorgan, Q3 estimates for a number of banks came down since the quarter started. Total Q3 earnings for the Zacks Major Banks industry, which includes JPMorgan, Wells Fargo and other major banks, are expected to be up +9.3% from the same period last year on +3.6% higher revenues. This would follow +17% earnings growth on +3% revenue growth in the preceding quarter. For the Finance sector, whose 45% earnings come from the Zacks Major Banks industry, total Q3 earnings are expected to be up +29.3% on +3.1% higher revenues.
The growth picture remains very strong, even though it is expected to decelerate in the current and coming quarters. But this isn’t news for the market, as consensus expectations have been reflecting this deceleration for quite some time.
More significant than the growth deceleration will be developments on the revisions front, with a favorable outcome being that estimates for 2018 Q4 and beyond remain stable. With the global economic growth pace expected to be a bit softer relative to what was expected earlier and the trade issue still largely unsettled, it is perhaps reasonable to expect estimates for 2019 to come down.
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And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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 http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Earnings Trends Highlights: JPMorgan and Wells Fargo
For Immediate Release
Chicago, IL – October 12, 2018 – Zacks Director of Research Sheraz Mian says, “For Q3 as a whole, total earnings are expected to be up +17.8% from the same period last year on +7.1% higher revenues, the 6th time in the last 7 quarters of double-digit earnings growth.”
Bank Earnings in the Spotlight
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:
Bank stocks have perked up a bit lately on rising interest rates, but the industry has struggled this year on persistent worries about the shape of the yield curve, trends in loan portfolios and trading volumes and the duration of the current economic cycle. With the yield curve starting to steepen in recent days, some of these worries have started easing. But given a number of previous ‘false dawns’, bank stock investors are justifiably skeptical of the staying power of recent interest rate moves.
JPMorgan (JPM - Free Report) , which kick-starts the Q3 earnings season for the Finance sector on October 12th, is expected to report +14% higher earnings on +7.4% higher revenues. The bank’s Q3 EPS estimates have come down modestly since the quarter got underway, with the current $2.25 per share estimate down 4 cents over the past month; not a big decline, but a decline nevertheless. Estimates for Wells Fargo (WFC - Free Report) , which reports the same day as JPMorgan, have remained stable over the same time period, likely reflecting Wells’ limited exposure to the capital market business, which has been a source of weakness for the major banks.
As with JPMorgan, Q3 estimates for a number of banks came down since the quarter started. Total Q3 earnings for the Zacks Major Banks industry, which includes JPMorgan, Wells Fargo and other major banks, are expected to be up +9.3% from the same period last year on +3.6% higher revenues. This would follow +17% earnings growth on +3% revenue growth in the preceding quarter. For the Finance sector, whose 45% earnings come from the Zacks Major Banks industry, total Q3 earnings are expected to be up +29.3% on +3.1% higher revenues.
The growth picture remains very strong, even though it is expected to decelerate in the current and coming quarters. But this isn’t news for the market, as consensus expectations have been reflecting this deceleration for quite some time.
More significant than the growth deceleration will be developments on the revisions front, with a favorable outcome being that estimates for 2018 Q4 and beyond remain stable. With the global economic growth pace expected to be a bit softer relative to what was expected earlier and the trade issue still largely unsettled, it is perhaps reasonable to expect estimates for 2019 to come down.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>
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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 http://www.zacks.com/performance for information about the performance numbers displayed in this press release.