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Why JPM Will Beat Estimates

Published 04/11/2014, 03:07 AM
Updated 07/09/2023, 06:31 AM

J P Morgan Chase & Co (NYSE:JPM) is set to report FQ1 2014 earnings before the market opens on Friday, April 11th. JPMorgan Chase is the largest bank in the United States. This quarter Wall Street is expecting JPM’s earnings to fall 11% compared to FQ1 last year while revenue is also expected to decrease by 2.3%. Banks make the big bucks when the economy grows and businesses and individuals take on loans to fund expansion, but this quarter investors have displayed a squeamish risk appetite. The caution may be the result of the Fed’s decision to taper and increasing concerns over the growth rate of the Chinese economy as well as smaller emerging markets. Additionally JPM continues to pay multibillion dollar legal settlements including a $1.7B settlement from January for ignoring warning signs over Madoff’s Ponzi scheme. Here’s what investors are expecting from JPM on Friday.

The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.

Estimates

The current Wall Street consensus expectation is for JPMorgan Chase to report $1.41 EPS and $24.553B revenue while the current Estimize.com consensus from 36 Buy Side and Independent contributing analysts is $1.43 EPS and $24.579B in revenue. This quarter the buy-side as represented by the Estimize.com community is expecting JPMorgan Chase  to beat the Wall Street consensus on EPS and revenue.

Over the past 6 quarters the consensus from Estimize.com has been more accurate than Wall Street in forecasting JPM’s EPS and revenue 5 and 3 times respectively. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time, but more importantly it does a better job of representing the market’s actual expectations. It has been confirmed by Deutsche Bank Quant. Research and an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.

The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a smaller differential betweenthe two groups' expectations.

Historic Earnings, Revenue

The distribution of estimates published by analysts on the Estimize.com platform range from $1.30 to $1.55 EPS and from $23.396B to $25.200B in revenues. This quarter we’re seeing a wide distribution of estimates on JPMorgan Chase.

The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signaling less agreement in the market, which could meangreater volatility post earnings.

 Earnings, Revenue Change

Over the past 4 months the Wall Street EPS consensus fell from $1.49 to $1.41 while the Estimize consensus dropped from $1.46 to $1.43. Meanwhile the Wall Street revenue consensus declined from $24.862B to $24.553B while the Estimize forecast sank from $24.956B to $24.579B. Timeliness is correlated with accuracy and downward analyst revenue revisions at the end of the quarter are often a bearish indicator.

JPM

The analyst with the highest estimate confidence rating this quarter is BradHewitt91 who projects $1.44 EPS and $24.450B in revenue. BradHewitt91 is ranked 13th overall among over 4,000 contributing analysts. Over the past year BradHewitt91 has been more accurate than Wall Street in forecasting EPS and revenue 52% and 49% of the time respectively throughout 662 estimates. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case BradHewitt91 is expecting JPMorgan Chase to beat the Estimize consensus on EPS but come up slightly short of the community’s expectations on revenue.

This quarter economic growth has been sluggish and estimates for JPMorgan Chase have accordingly been taken down considerably. With that being said, contributing analysts on the Estimize.com platform expect JPMorgan Chase to outperform the mark set by Street’s on both EPS and revenue by a small margin.

Get access to estimates for JPMorgan Chase published by your Buy Side and Independent analyst peers and follow the rest of earnings season by heading over to Estimize.com. Register for free to create your own estimates and see how you stack up to Wall Street.

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