Big banks set to kick off earnings season

The third-quarter earnings season is set to kick off and the big banks are the first group to step into the earnings confessional. JPMorgan Chase (NYSE: JPM) and Wells Fargo (NYSE: WFC) will kick things off when both report before the opening bell on October 15. Bank of America (NYSE: BAC) and Citigroup (NYSE: C) are both expected to report next week as well.

Over the past year, the financial sector as a whole and the banking industry have both lagged the overall market—at least based on how the Financial Select Sector SPDR (NYSE: XLF) and the SPDR S&P Bank ETF (NYSE: KBE) have performed. The S&P is up 5.5% in the past year while the XLF is 2.55% and the KBE is down 7.43%. With interest rates jumping late last year and now declining, it has been a tough stretch for banks.

Looking at how the individual banks have performed, JPMorgan has kept pace with the S&P, but the other three mentioned above have underperformed the market. Citi is up ever so slightly in the past year and Bank of America is down slightly. Wells is down 3.63% in the past year.

For comparison purposes and for the sake of making it easy to compare the four stocks, I put together three separate tables—one that shows the fundamental indicators from Tickeron, one that shows various indicators from Investor’s Business Daily, and one that shows two sentiment indicators.

The table from Tickeron shows that Citi and Wells are both undervalued while Bank of America and JPMorgan are valued fairly. Wells shows solid price growth while Citi shows better P/E Growth than the others.

Due to a technical issue, the SMR rating and the Profit Vs. Risk rating were not available at the time of this writing. I don’t know of another site that has anything like the Profit Vs. Risk rating, but Investor’s Business Daily has a similar version of the SMR rating. The IBD table shows that JPMorgan has the best SMR rating with an A while Bank of America and Citi both receive B ratings. Wells lags the others in this category with a C rating.

All four companies score really well in the EPS rating and that measures a company’s earnings growth against all other companies in IBD’s data base. The RS rating is a price relative strength rating and that reflects the price performance I mentioned earlier where JPMorgan has kept pace with the S&P while the others have lagged slightly.

As for the sentiment indicators, all of the short interest ratios are below average with JPMorgan having the highest one at 2.4. The average short interest ratio is the neighborhood of 3.0.

As for the analysts’ ratings, we see that Citi is pretty highly thought of by the analysts and it is the only one showing extreme optimism in this category. Wells is the least favorite stock of the four, but with all of the issues the company has had in the past few years that is to be expected. JPMorgan is a little surprising in this category given how well the stock has done and how solid the fundamentals are for the company.

Looking at all three aspects of analysis—fundamentals, sentiment, and technical factors—I like JPMorgan the best with Bank of America as my second favorite. I don’t know if there is anything here to think any of the stocks will do more than keep pace with the overall market, but if I had to pick one it would be JPMorgan Chase.