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JPMorgan, Citigroup, Wells Fargo and PNC Financial are part of Zacks Earnings Preview

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For Immediate Release

Chicago, IL – July 17, 2017 – releases the list of companies likely to issue earnings surprises. This week’s list includes JPMorgan (NYSE: (JPM - Free Report) – Free Report ), Citigroup (NYSE: (C - Free Report) – Free Report ), Wells Fargo (NYSE: (WFC - Free Report) – Free Report ) and PNC Financial (NYSE: (PNC - Free Report) – Free Report ).

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Bank Earnings Good, but Fail to Impress

JPMorgan (NYSE:(JPM - Free Report) – Free Report ) and Citigroup (NYSE: (C - Free Report) – Free Report ) handily beat earnings and revenue estimates whileWells Fargo (NYSE: (WFC - Free Report) – Free Report ) beat earnings expectations but modestly missed revenue estimates. The market wasn’t impressed these results, with all three bank stocks ending the otherwise positive Friday session in negative territory. A big reason for the market’s lukewarm reaction to the seemingly positive bank earnings is the soft guidance for the current period, particularly from JPMorgan. This will likely show up in lowered Q3 estimates in the coming days.

Bank stocks struggled in April and May as treasury yields kept going down, but they came back strong in June on the back of a trend reversal in yields and better than expected ‘Stress Test’ results that opened up outsized capital returns opportunities. Most of the headwinds facing banks in Q2 weren’t new; we knew that the capital markets business was soft due to muted volatility and that lower treasury yields would be weighing on margins even as growth in loan portfolios had started decelerating. Estimates had started coming down in the run up to these reports, but not by that much.

Results from these money-center banks and PNC Financial (NYSE:(PNC - Free Report) – Free Report ), which also reported June-quarter results on Friday, offer useful but not very favorable read-throughs for the regional banks and investment banks coming out with results this week.

Finance Sector Scorecard

It is still fairly early, with results from only 4 Finance sector companies in the S&P 500 (out of 95 total) out already. But these 4 companies are the some of the largest in the entire index and account for 22% of the sector’s total market capitalization in the index. Total earnings for these 4 Finance sector companies are up +6.2% from the same period last year on +2.5% higher revenues, with all 4 beating EPS estimates and 3 beating top-line estimates.

What this shows is that the Q2 earnings and revenue growth pace is below what we saw from the same four banks in the preceding quarter, but is otherwise better than other recent historical periods.

Total Q1 earnings for the sector as a whole, combining the reported actual results with the still-to-come estimates, are expected to be up +9.3% from the same period last year on +1.7% higher revenues.

Please note that the sector’s earnings growth expectation has gone up following the better than expected big bank results. It is very likely that the overall growth pace for the sector outpaces the strong showing we saw from the sector in the preceding period.

The Major Banks industry, of which JPMorgan, Wells Fargo and others are part, accounts for roughly 45% of the sector’s total earnings (insurance is the second biggest earnings contributor, accounting for about 25% of the total).

Q2 Earnings Season Scorecard (as of Friday, July 14, 2017)

We now have Q2 results from 30 S&P 500 members that combined account for 9.3% of the index’s total market capitalization. Total earnings for these companies are up +13.8% from the same period last year on +6% higher revenues, with 83.3% beating EPS estimates and an equivalent proportion beating revenue estimates.

This is still a fairly small sample of results, but what has come out already represents an improvement over what we had seen from the same group of index members in other recent periods.

We have a very busy docket of reports this week, with more than 200 companies reporting results, including 68 S&P 500 members. But we can clearly say that the Q2 earnings season is off to a good start. By the end of this week, we will have seen results from almost one-fifth of the S&P 500 members.

Q2 Expectations

Total Q2 earnings are expected to be up +6.6% from the same period last year on +4.5% higher revenues. This would follow +13.3% earnings growth in 2017 Q1 on +7.0% revenues growth, the highest growth pace in all most two years.

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