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JPMorgan Chase & Co. Crushes Q1 Earnings. Buy JPM Stock at Will.

JPM stock had declined almost 9% heading into its Q1 report. But JPM earnings look strong enough to jump-start another rally

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JPMorgan Chase & Co. (NYSE:JPM) stock is headed higher in Thursday’s premarket trading after the company opened banks’ Q1 earning season with a bang. JPM stock is projecting a mere 1% gain this morning, but investors can expect a lot more in the coming weeks.

JPMorgan Chase & Co. (JPM) Crushes Q1 Earnings. Buy JPM Stock at Will.

JPMorgan posted top- and bottom-line beats, including a sizable jump in profits. (More on that in a minute.) But it’s not just the numbers in this report that are likely to drive shares higher.

The strength in the quarter looks both broad-based and replicable going forward. Peers Wells Fargo & Co (NYSE:WFC) and Citigroup Inc (NYSE:C) both offered up solid quarters, implying beneficial conditions across the industry. Citigroup earnings beat consensus as well, while WFC’s revenue weakness appears largely related to self-inflicted wounds.

JPM stock had declined heading into the Q1 report, as concerns about President Donald Trump’s ability to drive bank-friendly regulation and the number of Federal Reserve rate hikes led to a pause in a big post-election rally.

But between JPMorgan’s competitors’ reports and its own sterling quarter, there’s enough to suggest that the rally in JPM shares will start again.

JPM stock chart view 1

JPMorgan’s Strong First Quarter

Across the board, the JPMorgan Q1 earnings report looks outstanding, with one notable exception.

Earnings for the quarter jumped a sharp 22% year-over-year to $1.65 per share, easily topping estimates by 13 cents. Margins were healthy, with the 22% increase in earnings per share coming on 6%-plus revenue growth to $25.59 billion. Return on equity returned to double digits, rising to 11% from 9% in Q1 2016.

Among the high notes:

  • The Corporate & Investment Bank segment was the star of the quarter, with net income rising a whopping 64% to $3.2 billion.
  • Investment banking revenue rose 34% year-over-year, likely boosted at least in part by fees from the Snap Inc (NYSE:SNAP) initial public offering.
  • Fixed-income revenue increased 17%, thanks to strength in Europe.
  • Loss provisions reversed to a benefit, largely due to an improvement in the oil and gas sector.
  • JPMorgan Chase maintained its No. 1 rank in investment fees on a global basis as well.

Commercial Banking posted impressive results, too, with profits up 61% on a 12% increase in revenue. An increase in Fed rates helped net interest income, and there too O&G improvement led to a reversal in credit loss provisions. Asset & Wealth Management did see income decline, but excluding a one-time gain on sale in the year-prior quarter and higher legal expense results appear to have been solid.

The one area of concern is in the consumer banking business.

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