JPMorgan Chase Q4 Earnings Preview: What to watch from the financial bellwether

JPMorgan Chase (JPM) is set to report its quarterly earnings tomorrow before the market opens, with analysts anticipating lower EPS compared to the previous quarter but higher revenue expectations. This article aims to examine the growth potential and investment value of JPMorgan Chase stock, considering fundamental factors, technical specifics, and market data. It also explores the key themes impacting the stock and characterizes the debate between the bulls and bears. 

Comments from the Goldman Sachs Financial Services Conference (December 5):

JPM presented at the conference last month. The company's outlook for FY24 net interest income (NII) was slightly above the original $89 billion, with adjusted expenses expected to be $84 billion. There will be a $3 billion impact from FDIC fees in Q4, which should be considered. 

First Republic is expected to outperform the deal model, which is a positive sign for the company. 

Trading revenues are expected to experience normal seasonal declines into the fourth quarter but will be relative to a strong comparable quarter last year. 

Markets revenues are expected to be flattish year-over-year. 

Investment Banking (IB) fees have been a challenging area in the current year. Although there is still time to go in the fourth quarter, based on current projections, there is expected to be healthy growth year-on-year and single-digit growth quarter-on-quarter in IB fees.

Revenue Expectations and Historical Performance: 

JPMorgan Chase (JPM) is a leading global financial services firm with a strong presence in investment banking, commercial banking, and asset management . The company's upcoming quarterly earnings report, scheduled for Jan. 12, is highly anticipated, as it is expected to provide insights into how JPMorgan has navigated the complexities of a changing macroeconomic landscape.

JPM is expected to report an EPS of $3.38 on $39.72 billion in revenue for the quarter. While this EPS figure is lower than the previous quarter's $3.97, the revenue expectation represents an improvement from the previous quarter's $39.40 billion. It is worth noting that JPMorgan Chase has beaten expectations in terms of both EPS and revenue in the past four consecutive quarters. 

Implied Volatility and Stock Price Movement: 

Based on current implied volatility, JPM stock has an expected move of +-$3.74 for the week, translating to a 2.2% potential stock price move. This expected move is the lowest among the four banking stocks reporting tomorrow. For the February 2024 cycle, a +-$6.44 stock price is expected, highlighting the significance of this earnings announcement for future stock movement. 

Earnings Surprise and Price Change: 

JP Morgan has an average earnings surprise figure of approximately 15.08%. There is a positive correlation of around 0.432 between earnings surprises and price changes, indicating that higher earnings surprises tend to be associated with more significant price changes in the stock. However, it is important to consider forward-looking statements made by the company, as they can impact the market's response to earnings and revenue beats. 

Key Themes and Challenges for US Banks: 

In 2024, US banks, including JPMorgan Chase, are expected to face challenges related to lower interest rates, credit quality, regulation, and the geopolitical landscape. While lower interest rates benefit bank capital, they can negatively impact earnings. JPMorgan Chase will need to navigate these headwinds and provide insights into their strategies moving forward. 

Technical Analysis: 

JPM stock experienced a breakout from a cup base in mid-December and rallied approximately 28% from late October lows to reach a record high of $173.38 on January 5. However, it has pulled back in the past two days, testing its 10-day moving average. This pullback suggests a potential consolidation phase for the stock. 

Conclusion:

As JPMorgan Chase prepares to announce its quarterly earnings, investors should closely monitor the company's revenue performance, surpassing past expectations. Despite the anticipated lower EPS, positive revenue growth suggests a resilient business. However, regulatory challenges, lower interest rates, and credit quality concerns remain key themes impacting US banks. JPMorgan Chase's interpretation of these factors and its forward-looking statements will provide essential insights for investors making informed decisions.