JPMorgan Chase (JPM) kicks off the financial earnings calendar early Tuesday, but even a good quarter may not be strong enough to give JPM stock a boost.
JPM stock shrugged off a total of $22 billion in costs last year to dispense with legal headaches, gaining 26% over the last 52 weeks. Even more impressive, JPMorgan stock added 14% in a little more than the past three months.
But that recent hot outperformance from JPM stock — the S&P 500 is up 5% over the same span — could lead to some quick-and-dirty profit taking if its earnings report doesn’t beat the Street — by a lot.
Wall Street expects the nation’s biggest bank by assets to issue a fourth-quarter earnings report showing a profit of $1.35 a share. However, the earnings whisper number is $1.45. Anything less than the earnings whisper number could lead to a short-term selloff in JPM stock.
Indeed, there’s a very real possibility of that happening. After all, JPMorgan earnings reports missed Street estimates in three of the last four quarters.
For the record, analysts expect the JPMorgan earnings report to show a drop in EPS to $1.35 from $1.39 a year ago, hurt by legal costs and settlements, among other factors. Revenue in the earnings report is projected to decline as well, falling 2.8% to $23.68 billion.
Still, even if the bank fails to surprise to the upside with that earnings whisper number and the earnings report is met with selling, JPM stock should recover in a session or two.
JPM Stock Has Plenty of Support
Profits will continue to be supported by cost cuts and the release of reserves, but genuine operational progress can be also be expected from JPMorgan. Looking ahead, JPM stock should benefit from improved credit quality, decreasing write-offs, and, of course, an improving economy and housing market.
Additionally, the investment banking side of the business should pull its weight when it comes to JPM stock, thanks to a pick-up in initial public offerings and mergers and acquisitions, even as trading revenue suffers from slower activity.
Furthermore, JPM stock probably gets a premium for both its so-called fortress balance sheet and the fact the CEO Jamie Dimon is still considered the best bank executive in the business even after the London Whale trading debacle and legal woes. That helps support JPM stock, promising more upside ahead.
But in the short term, don’t be surprised if JPM stock gets the financial earnings calendar off to a sour start when the bank releases its earnings report. The earnings whisper number looks like a tall order — predicting a surprise increase in earnings vs. the official forecast for a decline in profits.
Beyond that, the outlook should help right JPM stock soon enough. As long as the shockingly bad December jobs report proves to be a fluke, 2014 is shaping up to be a good one for country’s biggest banks, including Wells Fargo (WFC), Citigroup (C) and Bank of America (BAC).
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.