JP Morgan Earnings Preview: Fourth Quarter 2009

JP Morgan Chase [[JPM]] is scheduled to report their fourth quarter 2009 results before the market opens on Friday, January 15, 2010. Based on our analysis, we at are expecting JP Morgan to report better than expected quarterly results that will exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $27.22 billion and EPS of $.68. This would represent a 58% increase in revenues from last year’s $17.23 billion in the same period. The current analyst consensus estimates calls for revenues of $27.05 billion and EPS of $.62.


JP Morgan has firmly established itself as the premier financial stock during the tumultuous last couple of years. JPM’s superb management team deserves a lot of credit for successfully navigating their bank through the worst recession since the Great Depression. We anticipate that an improving credit environment will result in strong earnings from JP Morgan in the fourth quarter that will exceed Wall Street’s expectations for the eighth consecutive quarter.


CEO Jamie Dimon commented in October that JP Morgan was seeing signs of “consumer credit stability”, but cautioned that visibility remains limited heading into 2010. However, given the firm’s strong capital reserves, we continue to view JPM as the safest financial stock. Even Mad Money host Jim Cramer called JP Morgan the “cheapest bank stock in the world” early last month.


Stock Performance

In 2009, JP Morgan Chase’s shares posted a strong 32% gain and outperformed the 19% gain in the Dow Jones industrial average. While JPM’s stock never was as severely impacted as some of the other financial stocks (e.g. Citigroup, Bank of America, etc.), the stock price has risen 190% since early March. 



Shares are now trading at 13.6x consensus 2010 EPS estimates. This is a discount to the relative valuations of their peer group. We expect that the improving credit situation and JPM’s strong earnings potential should lead to another strong performance in 2010.


Recommendation: Buy with a $48 price target


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