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Zacks Earnings Trends Highlights: JPMorgan, Bank of America, Wells Fargo, and Goldman Sachs
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For Immediate Release
Chicago, IL – April 14, 2022 – Zacks Director of Research Sheraz Mian says, "We have already seen plenty of references to these headwinds from the companies that have reported already, including JPMorgan whose Q1 earnings declined -42.1% from the same period last year on -4.8% lower revenues"
Mixed Start to Q1 Earnings Season
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>>>
The JPMorgan (JPM - Free Report) earnings 'miss' is hardly an outlier development in the 2022 Q1 reporting cycle. What we are seeing at this admittedly early stage is that while companies are easily beating top-line estimates, they seem to be having a hard time doing the same with consensus EPS estimates.
This could change as we get into the heart of the Q1 earnings season. But if it is an early sign of things to come then it is likely reflective of the collective inability of management teams and analysts to fully grasp the impact of inflation and logistical bottlenecks.
We have already seen plenty of references to these headwinds from the companies that have reported already, including JPMorgan whose Q1 earnings declined -42.1% from the same period last year on -4.8% lower revenues. For the Finance sector as a whole, total Q1 earnings are expected to fall -19.8% on +1.9% higher revenues. `
JPMorgan set aside $1.5 billion as reserves for loan losses, which contrasts with the year-earlier period when earnings benefited from the release of $4.2 billion that had earlier been set aside for Covid-related loan losses. Management pointed out that about a third of the $1.5 billion total is tied to the bank's Russia exposure, with the remainder accounting for growing recession risks in the wake of the Fed tightening cycle.
It is these reserves that dragged down the profitability of the consumer banking business, even as other key metrics showed an improving outlook. Credit card loans were up +15%, while the overall loan portfolio increased +6%, in a welcome development after two years of sluggish growth.
The bank noted a +29% increase in credit-card spending, with travel and dining-related spending particularly strong. On the flip side, mortgage and auto-loan originations were down, with the former reflecting rising mortgage rates and the latter a function of continued supply-chain issues in the space.
We will be looking for confirmation of this trend in results from Bank of America (BAC - Free Report) and Wells Fargo (WFC - Free Report) , with the Russia exposure likely dominating Citigroup's results.
On the capital market front, trading volumes are up against last year's record levels. Trading revenues fell less than expected at -3%, with fixed income down -1% and equities down -7%. The better-than-expected fixed income trading volumes offers favorable read-throughs for Goldman Sachs (GS - Free Report) which has a bigger trading franchise in that asset class.
Looking at Q1 as a whole, total S&P 500 earnings are expected to be up +3.4% on +9.9% higher revenues. This is a significant deceleration from what we have been seeing in the preceding quarters.
Looking at the revisions trend in the aggregate, estimates are still going up, though only modestly so. There are plenty of cross currents once we look at the revisions trend at the granular level, with rising estimates in a few sectors offsetting estimate cuts in others.
Energy sector estimates had been going up as a result of rising oil prices, even before the Ukraine situation and we can see this within all of the major players in the sector. The significant estimate cuts to the Transportation sector, like air carriers and truckers, represent the flip side of what's happening to the Energy sector estimates.
There is a rising degree of uncertainty about the outlook, being driven by a lack of macroeconomic visibility as reflected in the Treasury yield curve that is at risk of inversion.
The Ukraine situation appears to be exacerbating pre-existing supply-chain issues, which combined with its impact on oil prices, is weighing on the inflation situation in hard-to-predict ways. The evolving earnings revisions trend will reflect this macro backdrop.
Why Haven't You Looked at Zacks' Top Stocks?
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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.
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Zacks Earnings Trends Highlights: JPMorgan, Bank of America, Wells Fargo, and Goldman Sachs
For Immediate Release
Chicago, IL – April 14, 2022 – Zacks Director of Research Sheraz Mian says, "We have already seen plenty of references to these headwinds from the companies that have reported already, including JPMorgan whose Q1 earnings declined -42.1% from the same period last year on -4.8% lower revenues"
Mixed Start to Q1 Earnings Season
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>>>
The JPMorgan (JPM - Free Report) earnings 'miss' is hardly an outlier development in the 2022 Q1 reporting cycle. What we are seeing at this admittedly early stage is that while companies are easily beating top-line estimates, they seem to be having a hard time doing the same with consensus EPS estimates.
This could change as we get into the heart of the Q1 earnings season. But if it is an early sign of things to come then it is likely reflective of the collective inability of management teams and analysts to fully grasp the impact of inflation and logistical bottlenecks.
We have already seen plenty of references to these headwinds from the companies that have reported already, including JPMorgan whose Q1 earnings declined -42.1% from the same period last year on -4.8% lower revenues. For the Finance sector as a whole, total Q1 earnings are expected to fall -19.8% on +1.9% higher revenues. `
JPMorgan set aside $1.5 billion as reserves for loan losses, which contrasts with the year-earlier period when earnings benefited from the release of $4.2 billion that had earlier been set aside for Covid-related loan losses. Management pointed out that about a third of the $1.5 billion total is tied to the bank's Russia exposure, with the remainder accounting for growing recession risks in the wake of the Fed tightening cycle.
It is these reserves that dragged down the profitability of the consumer banking business, even as other key metrics showed an improving outlook. Credit card loans were up +15%, while the overall loan portfolio increased +6%, in a welcome development after two years of sluggish growth.
The bank noted a +29% increase in credit-card spending, with travel and dining-related spending particularly strong. On the flip side, mortgage and auto-loan originations were down, with the former reflecting rising mortgage rates and the latter a function of continued supply-chain issues in the space.
We will be looking for confirmation of this trend in results from Bank of America (BAC - Free Report) and Wells Fargo (WFC - Free Report) , with the Russia exposure likely dominating Citigroup's results.
On the capital market front, trading volumes are up against last year's record levels. Trading revenues fell less than expected at -3%, with fixed income down -1% and equities down -7%. The better-than-expected fixed income trading volumes offers favorable read-throughs for Goldman Sachs (GS - Free Report) which has a bigger trading franchise in that asset class.
Looking at Q1 as a whole, total S&P 500 earnings are expected to be up +3.4% on +9.9% higher revenues. This is a significant deceleration from what we have been seeing in the preceding quarters.
Looking at the revisions trend in the aggregate, estimates are still going up, though only modestly so. There are plenty of cross currents once we look at the revisions trend at the granular level, with rising estimates in a few sectors offsetting estimate cuts in others.
Energy sector estimates had been going up as a result of rising oil prices, even before the Ukraine situation and we can see this within all of the major players in the sector. The significant estimate cuts to the Transportation sector, like air carriers and truckers, represent the flip side of what's happening to the Energy sector estimates.
There is a rising degree of uncertainty about the outlook, being driven by a lack of macroeconomic visibility as reflected in the Treasury yield curve that is at risk of inversion.
The Ukraine situation appears to be exacerbating pre-existing supply-chain issues, which combined with its impact on oil prices, is weighing on the inflation situation in hard-to-predict ways. The evolving earnings revisions trend will reflect this macro backdrop.
Why Haven't You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. 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.