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JPMorgan Earnings Preview — Expect a Hard Dose of Reality

JPM could take a hit if it's up front about European exposure

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Large bank and financial services firm JPMorgan Chase (NYSE:JPM) reports earnings for the quarter ending Sept. 30 before the market opens Thursday. With the memory of 2008 fresh in their minds, investors have been selling shares of the company on any whiff of a cascading event such as a potential collapse in Europe.

Thursday’s JPM earnings report might do little more than to show investors that, at least for now, an accommodating Federal Reserve is allowing banks to print money and profits. What is less sure is whether the news will be enough to break the speculation of global calamity that has kept share prices in the banking sector clamped down.

The front and center issue is exposure to Europe. What sort of skeletons or derivative contracts are in the closet? What happens if there is a default in Europe? What is there to backstop the system during a massive failure?

JPMorgan has exceeded average Wall Street estimates in each of the past four quarters:

JPMorgan Chase

When JPMorgan last reported results, it beat expectations amid some of the same fears that exist today. The luster from that report did not last long, however — expectations for the current quarter have been slashed by Wall Street analysts. For the quarter ending Sept. 30, the current estimate is for JPM to make 96 cents per share; ninety days ago, the estimate was $1.19.

For the full year, the average Wall Street estimate calls for a profit of $4.69 per share. The expectation is for 12% growth in 2012 to $5.27 per share. At current prices, shares of JPM trade for seven times current-year estimated earnings.

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