Yahoo Finanza Will the Market Face Depressed Corporate Profits on Friday?
JP Morgan Chase & Co, Wells Fargo & Company, BlackRock Inc., and Citigroup Inc. are all due to release their earnings before the market opens on July, 14th, as tighter credit conditions are likely to have influenced earnings of financial institutions. In addition to revenue and profit trends, as well as net interest margins and EPS, analysts will focus on credit quality and load loss provisions, non-performing loans and guidance about future business conditions.
Overall, it is anticipated that higher interest rates and persistent inflation may have impacted credit activity and potentially hindered overall consumption and spending. The key questions for this earnings season are whether there will be weaker-than-expected growth and lower corporate profits.
JP Morgan Chase & Co
After recording record revenues last quarter, with earnings of $12.6 billion, or $4.10 per share, the New York based JP Morgan Chase & Co will be looking for a strong Q2 when its report is dropped this week.
As the largest bank in the world by market capitalisation, JP Morgan’s operations are deeply intertwined with both the domestic US and international economies, which could have been problematic given the global economic situation. However, although inflationary pressures persist and further erode customer purchasing power, particularly in the US, consumer savings buffers are still generally robust and supported by decent wage growth.
With interest rates continuing upward over the course of the second quarter, it has produced a visible slowdown in numerous sections of the US economy. Despite this, JP Morgan has been showing a solid mix of profits growth, income, and value to its shareholders.
According to Zacks Investment Research, the consensus EPS expectation for the quarter is $3.66, based on 11 experts’ predictions. During the same period previous year, the reported EPS was $2.76.
Wells Fargo & Company
In the first quarter of 2023, Wells Fargo reported strong profits despite setting aside money for potential loan losses. The bank’s net income increased by over 30% to nearly $5 billion, mainly due to higher interest rates. Revenue also rose by 17%. However, Wells Fargo allocated $1.2 billion for credit losses, including provisions for possible losses in commercial real estate, credit card, and auto loans. Noninterest income, which includes income from ventures and mortgage banking, decreased by 13% during this period.
Wells Fargo & Co is planning to reduce its workforce in Orlando, as the bank recently announced that they will be closing a facility and letting go of just over 100 employees from their consumer and small business banking division. This move is part of the bank’s efforts to adjust their staffing levels according to their business needs, after Wells Fargo & Co had already laid off more than 100 employees in September.
According to Zacks Investment Research, the consensus EPS expectation for the quarter is $1.16 and $4.69 for the year. The prior year reported EPS was $3.14.
Citigroup Inc.
Citigroup’s stock performance has been weaker compared to other US banks in 2023. However, the bank reported positive financial results for the first quarter of the year. They recorded a net income of $4.6 billion and generated $21.45 billion in revenue, surpassing expectations.
The increase in revenue was driven by a significant 18% year-over-year growth in personal banking revenue, which was influenced by higher interest rates. Although fixed income markets revenue experienced a 4% increase, investment banking and equity market revenue declined. Despite the strong first quarter, Citigroup maintained its full-year guidance, as the CFO, Mark Mason, cited economic uncertainty and the unpredictable path of interest rates as reasons for their cautious approach.
According to Zacks Investment Research, the consensus EPS expectation for the quarter is $1.33 and $5.91 for the year. The prior year reported EPS was $7.11.
Trading During the Earnings Season
The earnings season (which happens at the end of each fiscal quarter when publicly-traded companies publish essential metrics regarding their quarterly performance) provides a window of opportunity to leverage financial reports’ release to take advantage of short-term trading opportunities and/or to optimize long-term investment positions.
If you follow risk-averse trading styles, like scalping and day trading, you can either open trading positions either before or after the release of earnings, depending on your directional bias.
If you have a strong directional bias and believe you have a clear understanding about where the stock is heading and about the potential impact of the earnings release, you may choose to open positions before the announcement.
But if you prefer a more cautious approach and want to avoid the uncertainty and potential volatility associated with earnings announcements, you may decide to wait until after the release to assess the market’s reaction. This allows you to have more information and potentially make more informed trading decisions.
The earnings season also allows you to analyse your portfolio and how to best allocate your funds. You can trim positions that no longer meet your criteria, take profits from successful investments, or reallocate funds to capitalize on new opportunities. Additionally, the earnings season provides an opportunity to reassess the overall balance and diversification of your portfolio to be sure it still aligns with your risk tolerance and long-term investment strategy.
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This article was originally posted on FX Empire
