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Bull of the Day: JPMorgan Chase (JPM)

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JPMorgan Chase & Co. (JPM - Free Report) is expected to keep its crown as one of the leading US banks when it comes out of the pandemic in 2021. It is back to being a Zacks Rank #1 (Strong Buy) as analysts continue to raise their earnings estimates for next year.

JPMorgan Chase is a global financial services firm with assets of $3.2 trillion. It operates in investment banking, financial services for small businesses and consumers, commercial banking, financial transaction processing and asset management.

A Big Beat in the Third Quarter

On Oct 13, JPMorgan reported its third quarter results and blew by the Zacks Consensus Estimate by 24.3%. It reported earnings of $2.92 versus the Zacks Consensus of $2.35.

The company saw revenue of $29.9 billion, which was flat year over year.

The quarter was led by the Corporate & Investment Banking segment as Markets revenue was up 30% and Global IB fees up 9%.

Consumers continued to save money, with Consumer & Community Banking seeing a 28% increase in deposits.

Asset & Wealth Management saw record revenue and net income with strong net inflows into long-term products.

Credit card spending was still lower for the quarter than a year ago, although in the month of September, credit and debit spending finally showed positive year over year growth for the first time since the pandemic started.

JPMorgan maintained its credit reserves at $34 billion.

It also has access to liquidity sources up to $1.3 trillion.

Analysts Bullish on Q4 and 2021

JPMorgan is scheduled to report its fourth quarter results shortly, on Jan 15, 2021.

It is among the Dow components that leads off earnings season every quarter.

The analysts are getting bullish heading into the report.

Over the last month analysts have raised their 2020 full year estimates as well as their Q4 estimates.

The 2020 Zacks Consensus Estimate has jumped to $7.57 from $7.45 during the last 30 days as 4 estimates have been revised higher, and none were cut.

That's still an earnings decline of 29.4% from 2019 as JPMorgan made $10.72 last year before the coronavirus hit.

But analysts are getting bullish about 2021 as well.

1 analyst raised their estimate for 2021 in just the last week which pushed the Zacks Consensus up to $9.24.

That's earnings growth of 22.1% compared to 2020.

It's also bullish that the analysts are raising estimates just ahead of the next earnings report.

Analysts are usually conservative and most stay on the sidelines just ahead of the earnings report unless they are very confident that things are better-than-expected.

Shares Up Big in the Last 3 Months

The banks were hit hard in the March 2020 coronavirus sell-off, for justifiable reasons.

But since the announcement in early November of the Pfizer vaccine, the banks have rallied, including JPMorgan.



Shares have jumped 30% in the last 3 months.

However, they are still down 10.3% year-to-date.

JPMorgan now has a forward P/E of 16.5, which is a little pricey on a historic basis for the company. However, if those earnings turn out to be better-than-expected in 2021, then the shares are attractively valued.

The company is still paying its dividend, with a yield of 2.9%.

JPMorgan is the only large US bank to be a Zacks Rank #1 (Strong Buy). Competitor Bank of America (BAC - Free Report) is a Zacks Rank #2 (Buy) and Citigroup (C - Free Report) is a Zacks Rank #3 (Hold).

For investors thinking about getting back into the banks, JPMorgan is one to keep on your short list.

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