What To Expect From JPMorgan Stock In Q1?

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Trefis
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JPMorgan (NYSE: JPM) is scheduled to report its fiscal Q1 2023 results on Friday, April 14, 2023. We expect JPMorgan to post mixed results with earnings beating the consensus but revenues missing the mark. The bank outperformed the street expectations in the last quarter, with revenues increasing 18% y-o-y to $34.5 billion. The top line mainly benefited from growth in net interest income (NII). The NII improved 48% y-o-y to $20.2 billion driven by loan growth and higher interest rates. That said, the revenues were somewhat offset by an 8% drop in the noninterest income, primarily due to a 59% decline in investment banking fees. We expect the same trend to continue in the first quarter of FY2023. 

Our forecast indicates that JPMorgan’s valuation is $157 per share, which is 23% above the current market price of around $127. Our interactive dashboard analysis on JPMorgan’s Earnings Preview has more details. 

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(1) Revenues expected to miss the consensus estimates

JPMorgan’s revenues grew 6% y-o-y to $128.7 billion in FY 2022. It was mainly due to a 28% jump in net interest income (NII), partially offset by an 11% drop in non-interest revenues. 

  • The bank generated 52% of the total revenues from NII in 2022, up from 43% in 2021. The NII benefited from higher interest rates and growth in outstanding loan balances. Notably, the Federal Reserve increased the interest rates seven times in 2022, followed by twice in 2023. We expect the Q1 results to follow the same trend as the last quarter.
  • The noninterest revenues decreased 11% y-o-y in 2022, mainly due to a 49% decline in investment banking fees, a 42% drop in the mortgage fees & related income, and higher investment securities losses. We expect the Q1 results to be on similar lines.
  • Overall, we forecast JPMorgan’s revenues to touch $140.26 billion for the full year FY2023.

Trefis estimates JPMorgan’s fiscal Q1 2023 revenues to be around $35.97 billion, marginally below the $36.18 billion consensus estimate. 

2) EPS is likely to beat the consensus estimates

JPMorgan Q1 2023 adjusted earnings per share (EPS) is expected to be $3.45 per Trefis analysis, slightly above the consensus estimate of $3.40. The bank reported a 23% y-o-y fall in the adjusted net income to $35.9 billion in FY 2022, despite positive growth in the revenues. It was because of an unfavorable build-up in the provisions for credit losses from -$9.3 billion to $6.4 billion. We expect the profitability numbers to see some improvement in Q1. Overall, JPMorgan is likely to report an annual GAAP EPS of $12.97 for the full-year 2023. 

(3) Stock price estimate is 23% above the current market price

We arrive at JPMorgan’s valuation, using an EPS estimate of around $12.97 and a P/E multiple of just above 12x in fiscal 2023. This translates into a price of $157, which is 23% higher than the current market price of $127. 

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 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 JPM Return -2% -4% 76%
 S&P 500 Return 0% 7% 83%
 Trefis Multi-Strategy Portfolio -2% 6% 232%

[1] Month-to-date and year-to-date as of 4/10/2023
[2] Cumulative total returns since the end of 2016

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