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Zacks Earnings Trends Highlights: JPMorgan, Citigroup and First Republic
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For Immediate Release
Chicago, IL – April 13, 2023– Zacks Director of Research Sheraz Mian says, "Total S&P 500 earnings for 2023 Q1 are expected to be down -10% from the same period last year on +1.7% higher revenues."
Q1 Earnings Season Likely to Reflect Continued Margin Pressures
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:
Total S&P 500 earnings for 2023 Q1 are expected to be down -10% from the same period last year on +1.7% higher revenues. This would follow the -5.4% decline in the preceding period's earnings (2022 Q4) on +5.9% higher revenues.
2023 Q1 will be the 5th consecutive quarter of declining year-over-year net margins, with S&P 500 net margins expected to compress 147 basis points from the year-earlier level. If Q1 margins do decline by this much, this will be the biggest decline since the 138 bps decline in 2022 Q4.
Net margins are expected to be below the year-earlier level for 12 of the 16 Zacks sectors in Q1, with the biggest declines in the Basic Materials (-425 bps), Construction (-402 bps), Tech (-323 bps), Medical (-299 bps), Business Services (-190 bps) and Cons. Staples (-145 bps).
Sectors expected to experience margin expansion in Q1 include Transportation (+195 bps), Energy (+156 bps), Aerospace (+34 bps), and Cons. Disc. (+7 bps).
As has been the case in recent quarters, estimates for 2023 Q1 came down as the quarter got underway. But while the trend of negative estimate revisions remains unchanged, the magnitude of cuts to Q1 estimates is relatively modest compared to what we saw in the comparable periods for the preceding two quarters. That said, estimates have come down across the board for most sectors.
The Finance sector, which dominates the initial phase of each reporting cycle, enjoyed modest upward revisions to estimates in the first two months of the quarter, but estimates started to come down as the regional banking crisis took hold following the Silicon Valley Bank episode.
The Finance sector as a whole is expected to show +0.3% earnings growth in Q1 on +6.6% higher revenues, which would follow the -17.1% earnings decline on +3.7% higher revenues in 2022 Q4.
The Major Banks industry, which includes JPMorgan (JPM - Free Report) and Citigroup (C - Free Report) that will kick-start the Q1 reporting cycle for the group this week, is expected to bring in +3.3% more earnings in the period on +12.4% higher revenues. The table below shows the Q1 earnings and revenue expectations for the Finance sector's constituent industries.
Q1 Earnings estimates for JPMorgan and Citigroup haven't changed much, with the current $3.42 EPS estimate down a hair from $3.44 on March 17th but unchanged from where it stood on January 13th. For full-year 2023, the Zacks Consensus EPS Estimate has only modestly come down over the past year.
As with JPMorgan, Q1 estimates for Citigroup haven't come down much. But full-year 2023 estimates have declined more notably for Citigroup.
Q1 earnings estimates for First Republic , which reports results on April 24th, have literally fallen off the cliff.
The First Republic example is by no means representative of the broader regional banks space, but it does go on to show that the profitability picture for parts of the regional banks industry has really taken a hit in the wake of the Silicon Valley development.
The big money-center banks like JPMorgan and Citigroup will enjoy strong net-interest income growth as a result of growing loan portfolios and expanded margins. But those gains will mostly get offset by weakness in investment banking and other fee activities. Credit quality still remains favorable by historical standards, though delinquencies are bound to increase as the economic cycle turns down. Some of that will show up in provisions for loan losses in these quarterly reports, as we did in the preceding quarterly reporting cycle.
The Earnings Big Picture
As noted earlier, the current aggregate earnings total for the index approximates to an index 'EPS' of $213.51, down from $242.98 in mid-April, 2022.
As mentioned earlier, 2023 aggregate earnings estimates on an ex-Energy basis are already down by more than -14% since mid-April 2022. Perhaps there will be some more downward adjustments to estimates over the coming weeks as companies report Q1 results and provide guidance for the coming quarters. But it is factually inaccurate to claim that 2023 earnings estimates have not fallen much.
The only scenario in which the more than -14% cut to 2023 earnings estimates may be called inadequate would be if the U.S. economy were headed toward a significant economic downturn. The risk of such a 'hard landing' for the U.S. economy can't be ruled out, but it is not our base case.
Why Haven't You Looked at Zacks' Top Stocks?
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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 https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zacks Earnings Trends Highlights: JPMorgan, Citigroup and First Republic
For Immediate Release
Chicago, IL – April 13, 2023– Zacks Director of Research Sheraz Mian says, "Total S&P 500 earnings for 2023 Q1 are expected to be down -10% from the same period last year on +1.7% higher revenues."
Q1 Earnings Season Likely to Reflect Continued Margin Pressures
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:
As has been the case in recent quarters, estimates for 2023 Q1 came down as the quarter got underway. But while the trend of negative estimate revisions remains unchanged, the magnitude of cuts to Q1 estimates is relatively modest compared to what we saw in the comparable periods for the preceding two quarters. That said, estimates have come down across the board for most sectors.
The Finance sector, which dominates the initial phase of each reporting cycle, enjoyed modest upward revisions to estimates in the first two months of the quarter, but estimates started to come down as the regional banking crisis took hold following the Silicon Valley Bank episode.
The Finance sector as a whole is expected to show +0.3% earnings growth in Q1 on +6.6% higher revenues, which would follow the -17.1% earnings decline on +3.7% higher revenues in 2022 Q4.
The Major Banks industry, which includes JPMorgan (JPM - Free Report) and Citigroup (C - Free Report) that will kick-start the Q1 reporting cycle for the group this week, is expected to bring in +3.3% more earnings in the period on +12.4% higher revenues. The table below shows the Q1 earnings and revenue expectations for the Finance sector's constituent industries.
Q1 Earnings estimates for JPMorgan and Citigroup haven't changed much, with the current $3.42 EPS estimate down a hair from $3.44 on March 17th but unchanged from where it stood on January 13th. For full-year 2023, the Zacks Consensus EPS Estimate has only modestly come down over the past year.
As with JPMorgan, Q1 estimates for Citigroup haven't come down much. But full-year 2023 estimates have declined more notably for Citigroup.
Q1 earnings estimates for First Republic , which reports results on April 24th, have literally fallen off the cliff.
The First Republic example is by no means representative of the broader regional banks space, but it does go on to show that the profitability picture for parts of the regional banks industry has really taken a hit in the wake of the Silicon Valley development.
The big money-center banks like JPMorgan and Citigroup will enjoy strong net-interest income growth as a result of growing loan portfolios and expanded margins. But those gains will mostly get offset by weakness in investment banking and other fee activities. Credit quality still remains favorable by historical standards, though delinquencies are bound to increase as the economic cycle turns down. Some of that will show up in provisions for loan losses in these quarterly reports, as we did in the preceding quarterly reporting cycle.
The Earnings Big Picture
As noted earlier, the current aggregate earnings total for the index approximates to an index 'EPS' of $213.51, down from $242.98 in mid-April, 2022.
As mentioned earlier, 2023 aggregate earnings estimates on an ex-Energy basis are already down by more than -14% since mid-April 2022. Perhaps there will be some more downward adjustments to estimates over the coming weeks as companies report Q1 results and provide guidance for the coming quarters. But it is factually inaccurate to claim that 2023 earnings estimates have not fallen much.
The only scenario in which the more than -14% cut to 2023 earnings estimates may be called inadequate would be if the U.S. economy were headed toward a significant economic downturn. The risk of such a 'hard landing' for the U.S. economy can't be ruled out, but it is not our base case.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks 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 https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.