JP Morgan Chase Earnings Preview: Second Quarter 2009

JP Morgan Chase [[JPM]] is scheduled to report their second quarter 2009 results before the market opens on Thursday, July 16. Based on our analysis, we at are expecting JPM to report better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $26.21 billion and EPS of $.10. This would represent a 42% increase in revenues from last year’s $18.40 billion in the same period. The current analyst consensus estimates calls for revenues of $25.87 billion and EPS of $.04.


Despite the difficult economic environment that has persisted over the last 18 months, JP Morgan has managed to exceed Wall Street’s estimates each of the last five quarters. The JPM management team deserves credit for recognizing the severity of the economic crisis earlier than most and has managed their business for long-term success.


Now that the company has successfully repaid their $25 billion TARP funds, we expect the company to focus more on increasing shareholder value. We expect by the first quarter of 2010, JPM will significantly increase their quarterly dividend payment from their current 0.6% yield.


Share Performance

Since the beginning of the year, JP Morgan’s shares are up almost 7%. In 2008, GS’s shares fell 28% but were able to outperform the 34% decline in the Dow Jones industrial average.



Shares are now trading at 12x consensus 2010 EPS estimates. This is inline with the relative valuations of their peer group. For investors looking for a safe financial stock, JP Morgan fits the bill. Over the next 12 months, the stock is likely to significantly increase their dividend yield, but we see limited upside for their share price over that term.


Recommendation: Hold with a $35 price target.


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