JP Morgan Surprises Wall Street With Impressive Growth

JP Morgan Chase reported second quarter 2011 results before the market opened today that exceeded Wall Street’s expectations. Revenue came in at $27.4 billion well ahead of Wall Street’s consensus estimate of $25.1 billion. Earnings per share came in at $1.27. That was up 17% from last year and $.06 above the Street’s expectations.

 

Key Highlights

In our opinion the key term in JP Morgan’s earnings report was growth. The premier bank on Wall Street is growing when everyone was expecting declines. Not only did earnings and revenue growth surprise investors, but JPM has hired 10,000 employees since the beginning of the year. Meanwhile Morgan Stanley is considering layoffs.

 

Jamie Dimon, Chairman and Chief Executive Officer, commented: “Looking forward, we continue to see substantial opportunities for the company. We are building our international presence, with more bankers, branches and products to serve our multinational clients where they want to be served. In the U.S., we are also investing in new branches and adding bankers and salespeople, expanding the reach of our consumer and wholesale businesses.”

 

Earnings Analysis

The earnings beat was nice, but the real story was the impressive revenue growth. Wall Street was expecting JPM to report a 2 percent decline in revenues, but instead the bank reported growth of 7 percent.

 

Share Performance

In pre-market trading, JP Morgan’s shares were up 2.4 percent to $40.58 following the good earnings report. We expect the stock to expand on those gains in trading today.

 

Valuation

JP Morgan shares are now trading at 7x consensus 2012 EPS estimates. That is below the relative valuation of their peer group. JP Morgan stock appears to be attractively valued with earnings estimates and price targets likely to be raised higher today.

 

Recommendation: Buy with a $48 price target.

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