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JPMorgan faces earnings decline for Q4, but stock price remains strong for now


MongiIG

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JPMorgan and US banks will have benefited from the rise in interest rates seen in recent months, but will they warn that a recession is on the way?

Stock marketSource: Bloomberg
 
 
 Chris Beauchamp | Chief Market Analyst, London | Publication date: Tuesday 10 January 2023 

JPMorgan earnings – what to expect

JPMorgan reports Q4 earnings on 13 January. The bank is expected to see revenue rise 13% to $34.3 billion, but earnings per share are expected to decline 7.2% to $3.09.

JPMorgan earnings preview – what does the Street expect?

Overall, higher interest rates and strong lending figures are expected to support the bank’s Q4 results.

During the quarter, US interest rates continued to rise, reaching a fifteen-year high of 4.24-4.5%, as the Fed battled strong inflation readings. Net interest margins will have been boosted for banks overall, with JPMorgan no exception. While the US economy still faces a tough year, for now the overall picture remains relatively healthy, with trading volumes, investment banking fees and income from mortgage banking all remaining strong.

At 11.6 times earnings, JPMorgan shares do not look too richly-valued, and the 2.9% dividend yield provides an additional attraction for income investors.

JPMorgan earnings – what do the brokers say

JPMorgan remains a highly-favoured stock among analysts. 27 analysts cover the company, and of these 16 have the stock at a ‘buy’ rating.

At present, the median target price is $145.10, around a 5% premium to the current market price.

JPMorgan stock – technical analysis

JPMorgan’s stock price has rallied sharply from its September low, and recent price activity has seen it move back above $130, holding above the 50-day SMA in the process.

Additional upside in the near-term now needs to come with a break above $140, an area that formed resistance back in March 2022. The rally since October has seen the shares bring the downtrend from the 2021 highs to an end, with buyers stepping in during early December to create a higher low that provided a springboard for further gains.

A move back below $125 would be a negative development, and indicate a possible move back to $122 as a support area.

JPMorgan chartSource: ProRealTime


A bellwether for the US economy

Bank stocks are always closely-watched for the insight the provide into the US economy. This time around they are more important than usual, as investors look for a sign that the US will fall into recession.

Should JPMorgan beat estimates then this will provide a lift to risk appetite generally, and potentially result in an extension of the rally in stocks seen around the globe. US stocks are in dire need of this, having lagged behind their global peers in recent weeks.

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