Next week kicks off earnings season for the financial sector as bank stocks start to report.
The banking industry is seen as a bright spot this earnings season, with analysts predicting that it will be one of four sectors to eek out earnings growth. AnS&P Global Market Intelligence pollshowed that analysts are expecting earnings growth of 1. 73% from the financial sector, the second highest expected EPS growth rate. With that said, worse-than-expected results next week could put a damper on the market as a whole because the market could take that as a sign that Q3 will undercut analysts’ predictions as a whole.
JP Morgan Chase (NYSE: JPM)
JPM stock will kick things off for the banking industry with earnings due out before the bell on Oct 15. So far this year, America’s largest bank by market value has turned-in solid EPS growth andmost are expectingthis quarter to yield EPS of $ 2. 45; a 4.7% increase from the year-ago quarter. Revenue is seen coming in at $ 28. (Billion.)
TheFed’s interest rate decisionsand how they’ll impact the bank will be the key takeaway from the earnings call as many are expecting to see further easing in the months ahead. Investors will also be keen to find out more about JPM’s expansion plans— the bank isadding 400 new branchesacross the US and expanding its digital banking offerings.
Citigroup (NYSE: C)
C stock is also due to release its Q3 results on Oct 15 and the bank isseen delivering another impressive performance. Analysts are expecting Citigroup to report EPS of $ 1. 95 on revenue of $ 18. 54 billion. Last quarter was an impressive one for C stock as its investments in Tradewebstarted to pay off.
Again the Fed’s interest rate cuts and their impact on margins will be a key focus, but investors will also be looking for assurance that the bank will continue itsbuyback program.
Wells Fargo (NYSE: WFC)
WFC stock will join Citigroup and JP Morgan with an Oct 15 release date. The bank isexpected to reportEPS of $ 1. 14 on revenue of $ 21. 12 Billion. Unlike its peers though, WFC is struggling against more than just macroeconomic headwinds. The bank’s fake account scandal has led investors to dump the stock, but with a new CEO due to join the bankat the end of October, things could be turning around.
Since the scandal, WFC has been working to regain customers’ trust. Growth in the firm’s loans outstanding will be under scrutiny as investors look for proof that its strategy is working. Investors will also be looking to see further cost reductions, anotherpillar of the bank’s strategygoing forward.
Johnson & Johnson (NYSE: JNJ)
Some heavy hitters that aren’t bank stocks are also reporting next week as well. JNJ stock is also set to reveal its Q3 results on Oct 15 – the consumer goods firmis seen postingEPS of $ 2. 00 on revenue of $ 20 .1 billion. If the firm meets expectations that would be a 2.4% decline from the previous year EPS and a 1.5% revenue decline.
JNJ has been caught up inseveral legal issuesrecently, which has hurt the firm’s finances and impacted consumer confidence. The firm’s legal tie-ups are likely to cast a shadow over its finances for some time, so the market will be looking for management’s comments regarding progress on the litigation front. Investors will also be looking for growth in JNJ’s pharmaceutical arm, a part of the business that Credit Suisse’sMike Miksic says has potential.
Plus, its worth noting that lackluster expectations for JNJ’s Q3 results means there could be an upside surprise which would likely drive Johnson & Johnson’s stock higher.
United Airlines (NYSE: UAL)
Also on Oct 15, UAL stock is due to report. Analystsare expecting to seeEPS of $ 3. 95 on revenue of $ 11. 41 billion. Both figures would represent year-over-year increases for the U.S. carrier. Investors will be focusing on the firm’s profits as worries about rising unit costs hasweighed on the airline sectoroverall.
The market will also be keen to hear management’s comments regarding canceled Boeing’s (NYSE: BA) 737 Max issues and the upcomingtariff on Airbus planes. UAL has45 unfulfilled Airbus orders, which could become 10% more expensive once the new tariff kicks in.
Bank of America (NYSE: BAC)
On Oct 17, BAC is due to release its quarterly results in what will be another litmus test for this earnings season. BAC stock has been beating analyst’s estimates over the past year, which has helped propel the stock more than 13% higher in 2019 . For Q3, the firm isexpected to reportEPS of $ 0. 50 on revenue of $ 22. (billion.
Like the rest of its peers, BAC’s profit margins will be thestar of the showas investors look for clues on how the Fed’s easing has impacted the bank. Going forward, investors are also becomingincreasingly worried about an economic downturn, so the quality of BAC’s loans will also be an important factor to watch.
International Business Machines (NYSE: IBM)
On Oct 16 tech giant IBM is set to release its quarterly results as well. The firm isexpected to reportEPS of $ 2. 66 on revenue of $ 18. 23 Billion. The firm has been on a multi-year turnaround plan that has kept the share price from making any meaningful moves toward a recovery.
However, this could be the quarter that Big Blue turns things around. The firm has officiallyowned Red Hatfor an entire quarter, so thebenefits of that acquisitionshould start to become apparent . This quarter could make or break IBM as it will either justify the high price IBM paid for Red Hat, or add more fuel to bears’ argument that it overpaid.
Morgan Stanley (NYSE: MS)
To round out the week for bank stocks, MS stock is due to report Q3 results on Oct 17. The firm is expected to report EPS of $ 1. (on revenue of $ 9.7 billion.)
This quarter will be an important one for MS stock as previous quarters have shown that itsequity business is struggling. Morgan Stanley has been working togrow the other arms of its businessin order to reduce reliance on trading revenue, so investors will be looking to see its wealth management and commercial banking arms growing in terms of percentage of overall revenue.
So far MS has been one of the worst performers in the financial sector, but with expectations low heading into earnings there’s a chance of an upside surprise.
This article was edited bySam Bourgi.
Last modified (UTC): October 10, 2019 19: 13
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