Estimates have been rising for JPMorgan Chase & Co. (JPM) after the company delivered better than expected first quarter results on April 13.
It is a Zacks #2 Rank (Buy).
Analysts project solid growth for JPMorgan over the next few years due to the company’s diverse business mix and relatively solid financial position. On top of this, it pays a dividend that yields a solid 2.8%.
Valuation is attractive too with shares trading at less than 9x forward earnings.
Company Description
JPMorgan Chase is a diversified financial services company with $2.3 trillion in assets and operations around the globe. It offers investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, asset management and private equity.
Revenue for the first quarter of 2012 was divided as follows:
Retail Financial Services: 28%
Investment Banking: 27%
Card Services & Auto: 17%
Asset Management: 9%
Treasury & Securities Services: 7%
Corporate/Private Equity: 6%
Commercial Banking: 6%
The company is headquartered in New York and has a market cap of $167 billion.
First Quarter Results
JPMorgan Chase reported better than expected first quarter results on April 13. Earnings per share came in at $1.31, beating the Zacks Consensus Estimate of $1.17. It was a 2% increase over the same quarter last year.
Revenue rose 6% to $27.417 billion, well ahead of the Zacks Consensus Estimate of $24.361 billion. Increases in Retail Financial Services, Commercial Banking, Corporate/Private Equity and Treasury & Security Services were somewhat offset by a decline in Investment Banking.
Total non-interest expense rose 15% year-over-year and led to a 9% decline in pre-provision income. But overall net income was down just 3% due to a 38% decrease in the provision for credit losses. Earnings per share were boosted by a 5% decline in diluted earnings per share.
Estimates Rising
Analysts almost unanimously revised their estimates higher for both 2012 and 2013 following its first quarter results. This sent shares to a Zacks #2 Rank (Buy).
The Zacks Consensus Estimate for 2012 is now $4.97, which represents 11% over 2011 EPS. The 2013 consensus estimate is currently $5.63, corresponding with 13% growth.
Analysts believe that the company’s diverse business mix will enable it to generate strong earnings growth across economic cycles. And its solid financial position relative to its peers will allow it to take market share over the next few years.
Dividend
JPMorgan has one of the stronger balance sheets among the mega cap banks, and this has allowed it to buyback stock and raise its dividend.
The board of directors recently authorized a new $15 billion equity repurchase program, for instance. And after slashing its quarterly dividend to 5 cents per share during the financial crisis, the company raised it to 25 cents in early 2011 and to 30 cents in 2012.
It currently yields a solid 2.8%.
Valuation
The valuation picture looks attractive for JPM. Shares trade at just 8.7x 12-month forward earnings, a slight discount to the industry median and its 10-year median of 11.4.
Its price to tangible book ratio of 1.4 is also below the peer group multiple of 2.4 and its historical median of 2.3.
The Bottom Line
With rising estimates, solid growth projections, a 2.8% yield and attractive valuation, JPMorgan offers a lot of upside potential.
Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.
