Today's Must Read
New Branches, Loan Growth Aid JPMorgan (JPM), Mortgage Ails
Loan Growth Supports Wells Fargo (WFC), Legal Issues Linger
Tuesday, July 23, 2019
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including Microsoft (MSFT), JPMorgan (JPM) and Wells Fargo (WFC). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Microsoft’s shares have gained +29% in the past year, outperforming the S&P 500’s’ gain of +4.1% during the same period. Microsoft reported stellar fourth-quarter results. Both top and bottom lines increased year over year. Robust execution and better-than-expected demand from customers for hybrid cloud offerings drove quarterly results.
Moreover, strong Commercial business positively impacted top and bottom line. The Zacks analyst thinks Microsoft is benefiting from a growing user base for several of its applications like Office 365 commercial, Dynamics, Outlook mobile and Teams. Further, acquisitions like PlayFab and GitHub expand Microsoft’s TAM and penetration.
Also, Microsoft’s collaboration with AT&T bodes well. The company is consistently integrating the cloud capabilities of Azure into its gaming segment which is yet another positive. However, stiff competition remains a concern.
Shares of JPMorgan have gained +1.7% in the past three months, outperforming the Zacks Major Regional Banks industry’s decline of -0.2%. It has an impressive earnings surprise history, having surpassed expectations in three of the trailing four quarters. The bank’s second-quarter 2019 results depict decent loan growth and lower credit costs, while dismal trading and investment banking performance was on the downside.
The Zacks analyst thinks improving loan balance, strong balance sheet, branch openings in new regions, focus on strengthening credit card business and the deal to acquire InstaMed will support the bank's financials. However, weak mortgage banking performance, mainly due to lower origination volume and rise in competition, is a concern.
The company’s excessive dependence on capital markets revenues is another major concern. These concerns are expected to hamper fee revenue growth to some extent.
Wells Fargo’s shares have underperformed the Zacks Major Regional Banks industry in the past six months (-6.1% vs. +3.5%). Its earnings surprise history is impressive, with results surpassing expectations in three of the trailing four quarters. Second-quarter results reflect fee income growth and lower costs, partially offset by higher provisions.
The Zacks analyst thinks restructuring activities and higher interest income, aided by loan growth, are a tailwind. Further, reinvestment in businesses to enhance compliance and risk management capability bodes well. However, Wells Fargo has been slapped with several sanctions, including a cap on asset growth by the Fed.
These restrictions will remain in force given the CFPB's dissatisfaction with the bank’s progress on fixing risk-management issues. Also, rising expenses due to pending litigation issues and hike in personnel costs curb bottom-line expansion.
Other noteworthy reports we are featuring today include American Express (AXP), Schlumberger (SLB) and Exxon Mobil (XOM).
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Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>