JPMorgan Stock To Edge Past The Street Expectations In Q1?

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JPMorgan (NYSE: JPM) is scheduled to report its fiscal Q1 2022 results on Wednesday, April 13, 2022. We expect JPMorgan to post strong results, with revenues being in line (just ahead) and earnings beating the expectations. The bank managed to edge past the street expectations in the last quarter. It reported total revenues of $29.3 billion, which was  at par with the year-ago period. While the asset & wealth management division grew 16% y-o-y, followed by a 6% rise in the commercial banking unit, it was offset by a 4% decline in the consumer & community banking business. We expect the improvement in the interest rates and loan growth to boost the first-quarter revenues.

Our forecast indicates that JPMorgan’s valuation is $173 per share, which is 30% above the current market price of around $133. Our interactive dashboard analysis on JPMorgan’s Earnings Preview has more details. 

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(1) Revenues expected to be in line with the consensus estimates

JPMorgan’s revenues for full-year 2021 were $121.6 billion, marginally more than the year-ago figure. It was driven by growth in corporate & investment banking, commercial banking, and asset management segments, partially offset by lower revenues in the consumer & community banking and corporate divisions. 

  • The corporate & investment banking segment (includes sales & trading and investment banking) grew 5% y-o-y in 2021. While the investment banking and equity trading revenues increased by 41% and 22% respectively, the growth was partially offset by a 19% decrease in the FICC (fixed income, currency, & commodity) trading. We expect the same trend to continue in the first quarter.
  • Consumer & community banking is the largest contributing segment of JPMorgan. The division suffered in 2021 due to lower net interest income, which was down due to interest rate headwinds and lower loan growth. That said, the consumer spending levels have somewhat improved in the year. Further, the NII is likely to see some growth in Q1.
  • The asset & wealth management revenues grew 19% y-o-y in 2021. It was due to strong net-fund inflows and higher net investment valuation gains. We expect the same momentum to continue in the first quarter.
  • Overall, we expect JPMorgan’s revenues to touch $124.2 billion for the full-year FY2022.

Trefis estimates JPMorgan’s fiscal Q1 2022 revenues to be around $31.06 billion, just above the $31.03 billion consensus estimate. We expect the growth in core banking and asset & wealth management revenues to drive the first-quarter results.

The Federal Reserve has increased the interest rates by a quarter-point in March. Further, it is expected to hike the rates multiple times in FY2022. It will likely help JPMorgan’s core-banking revenues. On the flip side, capital markets and trading revenues are likely to normalize with the recovery in the economy. Our dashboard on JPMorgan’s revenues offers more details on the company’s operating segments along with our forecast for FY2022.

2) EPS is likely to top the consensus estimates

JPMorgan Q1 2022 adjusted earnings per share (EPS) is expected to be $2.76 per Trefis analysis, almost 3% above the consensus estimate of $2.69. The bank reported a 70% y-o-y jump in the adjusted net income to $46.5 billion in 2021, primarily due to a favorable decrease in the provisions for credit losses from $17.5 billion to -$9.3 billion. This led to an annual EPS of $15.36. That said, the firm’s non-interest expenses as a % of revenues increased from 55% to 61% in the fourth quarter, mainly due to higher compensation costs. We expect the higher compensation costs to impact the first-quarter FY 2022 results as well. Overall, JPMorgan is likely to report an adjusted net income of $34.9 billion and annual EPS of $11.85 for full-year 2022. 

(3) Stock price estimate 30% above the current market price

We arrive at JPMorgan’s valuation, using an EPS estimate of around $11.85 and a P/E multiple of just below 15x in fiscal 2022. This translates into a price of $173, which is 30% more than the current market price of close to $133. 

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year

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 Returns Apr 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 JPM Return -2% -16% 54%
 S&P 500 Return -3% -7% 97%
 Trefis Multi-Strategy Portfolio -1% -9% 259%

[1] Month-to-date and year-to-date as of 4/12/2022
[2] Cumulative total returns since the end of 2016

 

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