- Bellwether JPMorgan reports earnings today
- Goldman Sachs will be in focus next week
- Credit card companies also on investors' radar
Despite all the excitement around technology stocks over the past six months, in the past few quarters is has been results from the big US banks and broking firms which have tended to set the tone for the market.
However, given the sharp slowdown in deal activity in the last three months compared with the same quarter of 2022, analysts are expecting a sharp drop in earnings for the big Wall Street players.
JPMORGAN A ‘SAFE HAVEN’
First to report second-quarter earnings are the world’s largest financial company by market cap, JPMorgan (JPM:NYSE), along with banking giants Citigroup (C:NYSE) and Wells Fargo (WFC:NYSE) later today.
JPMorgan, whose shares have been a ‘port in a storm’, gaining 10% so far this year to $149 as investors fret over banking profits due to higher funding costs, is expected to report second-quarter earnings of $4.00 per share on revenue of around $39 billion according to Refinitiv estimates.
That would mark a 45% increase in profit and a 27% increase in revenue, partly helped by the takeover of First Republic Bank in May which added over $200 billion of loans and close to $100 billion of deposits.
Investors will also scrutinise comments by chief executive Jamie Dimon on the outlook for the US economy and forecasts for the bank’s earnings for the next few quarters.
When JPMorgan reported its first-quarter results in April the shares jumped more than 8%, their biggest one-day earnings-related jump in two decades.
Analysts and investors are less bullish on Citigroup after the bank was told by the Federal Reserve it needed to increase its capital buffer, which didn’t go down well with chief executive Jane Fraser.
Forecasts for second-quarter earnings have fallen from $1.66 per share to $1.41 in the past month while revenue is estimated at $19.3 billion.
Potentially, if earnings beat this low hurdle, Citigroup shares could break out of their narrow trading range below $50.
Wells Fargo was famously one of Warren Buffett’s favourite stocks, with the ‘Sage of Omaha’ praising its ‘superbly-managed high-return’ banking business, but the billionaire investor fell out of love with the firm and sold the last of his shares – which he had held for over 30 years – just over a year ago.
The market is currently forecasting earnings of $1.14 per share on $20 billion of revenue.
OTHER RESULTS TO WATCH
On Tuesday next week (18 July), Bank of America (BAC:NYSE) and Morgan Stanley (MS:NYSE) report earnings, with Goldman Sachs (GS:NYSE) reporting the following day (19 July).
Goldman Sachs has been the talk of the market this week after it began guiding down earnings forecasts, blaming a slowdown in its investment bank and the commercial real estate market as well as the unwinding of several consumer banking ventures.
Goldman shares have been one of the worst performers in the sector, losing 5% so far this year, and the bank is expected to post its worst quarterly result for many years.
Other stocks to watch are American Express (AXP:NYSE) on Friday 21 July, Mastercard (MA:NYSE) on 26 July and Visa (V:NYSE) on 24 July.
All three will be closely scrutinized for clues on how confident US consumers are in terms of their spending, as consumption represents a large chunk of the US economy and all three stocks are trading at or close to all-time highs.
It’s worth stressing that it’s not just the results which analysts and investors will be looking at, the outlook statements will be just as closely watched as it is generally accepted that US earnings forecasts for this year and next year look stretched to put it mildly.
