Big Banks Set to Kick Off Earnings Season—How Do They Stack Up to One Another?
Based on assets, the four largest banks in the United States are JPMorgan Chase (NYSE: JPM), Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), and Citigroup (NYSE:C). All four of these banks will report second quarter earnings results within a few days of one another. JPMorgan, Wells Fargo, and Citi will all report before the opening bell on July 14. Bank of America will report before the open two days later.
You could lump these four stocks together with a few other companies and you would have the definition of “too big to fail”. Too big to fail is a phrase that came about after the financial crisis in 2007-2009. It was used to describe financial institutions that were so big that the overall economy could come under pressure if one of them failed.
Since that time the Treasury and the Federal Reserve have a system of tests that they call a "stress test" to measure different aspects of the bank to make sure we don't go through another financial crisis. Because of the nature of the test and the industry that was at the center of the financial crisis, the companies in this group are all financial firms.
The group is susceptible to moving with the overall economy. If the economy is growing banks tend to do well and they don't do well when the economy is contracting. With the economy struggling right now due to the global health crisis, banks are struggling too.
Looking at the Tickeron scorecard for each of the four stocks, there is only one that is rated as a “buy” while one is rated as a “sell” and two are rated as “strong sells”. Citigroup is the lone buy in the group.
JPMorgan and Wells Fargo are the two that get the strong sell ratings, and Bank of America is rated as a sell.
Digging into the reasoning behind the ratings, the group as a whole doesn’t do real well on the fundamental side of the equation. All four stock rank poorly in the SMR rating category. In fact, all four are in the bottom 10 percentile. Citi ranks highly in its Outlook Rating and in the Valuation Rating, but it also ranks poorly in four categories.
Bank of America scores well in the Outlook Rating and it ranks poorly in two other categories. Wells Fargo ranks poorly in four categories but gets a good Valuation Rating. JPMorgan gets neutral ratings in four categories and poor ratings in two categories.
Turning our attention to the technical analysis, three of the four have received bullish signals from the AROON Indicator in the last two weeks. Unfortunately, those are the only positive indicators in the whole bunch.
All four show stochastic indicators in oversold territory with Citigroup only being oversold for four days. Bank of America has been in oversold territory for nine days. Both JPMorgan and Wells Fargo have been in oversold territory for 14 days.
Looking at the analysts EPS estimates for the quarter, expectations are pretty low. I looked at the current EPS estimate, where the estimate was 90 days ago (when the pandemic was just starting to take a toll in the U.S.), and what each companies’ EPS was for the same quarter last year. The results were pretty abysmal.
Bank of America has the smallest adjustments of the bunch. The EPS estimate has been lowered by 43.4% over the last three months and the estimate is 59.46% below last year’s EPS figure. JPMorgan shows slightly worse adjustments with the estimate being lowered by 44.55% and 60.28% below last year.
Citigroup’s estimate has been lowered by 68.71% and it’s 76.41% below 2019. Wells Fargo has struggled for several years now compared to its rivals and it is expected to struggle more than the others this quarter. The EPS estimate has dropped 91.89% and it’s 95.38% below the second quarter of 2019.
Banks have lagged the overall market over the past year and based on the earnings forecast, it doesn’t look like it will get any better after the earnings announcements. Citigroup might be worth a short-term trade based on Tickeron’s scorecard, but the other three have little appeal for investors at this point in time.
We could see small jumps if the banks beat estimates, but the long-term trend for earnings and revenue will need to improve dramatically to appeal in investors again.
Aroon Indicator for JPM shows an upward move is likely
JPM's Aroon Indicator triggered a bullish signal on May 10, 2023. Tickeron's A.I.dvisor detected that the AroonUp green line is above 70 while the AroonDown red line is below 30. When the up indicator moves above 70 and the down indicator remains below 30, it is a sign that the stock could be setting up for a bullish move. Traders may want to buy the stock or look to buy calls options. A.I.dvisor looked at 235 similar instances where the Aroon Indicator showed a similar pattern. In of the 235 cases, the stock moved higher in the days that followed. This puts the odds of a move higher at .
Technical Analysis (Indicators)
Bullish Trend Analysis
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where JPM advanced for three days, in of 314 cases, the price rose further within the following month. The odds of a continued upward trend are .
Bearish Trend Analysis
The Stochastic Oscillator may be shifting from an upward trend to a downward trend. In of 61 cases where JPM's Stochastic Oscillator exited the overbought zone, the price fell further within the following month. The odds of a continued downward trend are .
The Momentum Indicator moved below the 0 level on June 01, 2023. You may want to consider selling the stock, shorting the stock, or exploring put options on JPM as a result. In of 84 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
The Moving Average Convergence Divergence Histogram (MACD) for JPM turned negative on May 23, 2023. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 48 similar instances when the indicator turned negative. In of the 48 cases the stock turned lower in the days that followed. This puts the odds of success at .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where JPM declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
Fundamental Analysis (Ratings)
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating well-balanced risk and returns. The average Profit vs. Risk Rating rating for the industry is 84, placing this stock slightly better than average.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to consistent earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating steady price growth. JPM’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is significantly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (1.458) is normal, around the industry mean (0.923). P/E Ratio (10.142) is within average values for comparable stocks, (17.405). Projected Growth (PEG Ratio) (2.892) is also within normal values, averaging (3.201). JPM has a moderately low Dividend Yield (0.029) as compared to the industry average of (0.057). P/S Ratio (2.997) is also within normal values, averaging (2.306).
Notable companies
Industry description
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High and low price notable news
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Fundamental Analysis Ratings
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
General Information
a major bank
Industry MajorBanks
JPM and
Correlation & Price change
A.I.dvisor indicates that over the last year, JPM has been closely correlated with BAC. These tickers have moved in lockstep 85% of the time. This A.I.-generated data suggests there is a high statistical probability that if JPM jumps, then BAC could also see price increases.
