It's that time again.
Earnings season is finally here with JPMorgan Chase one of the first big banks to report first-quarter results before US markets open on Wednesday.
Shares of the America's largest bank have appreciated over 21% year-to-date, outperforming the S&P 500 which is up roughly 10%. Banks stocks in general have been supported by the increasingly optimistic outlook for the US economy, vaccine rollouts and more fiscal policies fuelling economic growth. Even Jamie Dimon, chief executive officer (CEO) is optimistic over a prolonged economic rebound lasting until 2023.
Market expectations: EPS & Earnings
Investor sentiment towards JPMorgan chase will certainly be impacted by the pending earnings report later today. According to Bloomberg, the adjusted earnings per share (EPS) estimates stand around $3.01 per share on $30.42 billion in revenues for Q1 2021. For a full year, EPS are projected at $11.25 while full-year revenues are seen hitting roughly $118.02 billion – the first potential decline in six years.
What to look out for…
There seems to be a lot of optimism around the investment bank's first-quarter results. With adjusted EPS in Q1 forecast to grow a whopping 286.38%, this will be the strongest earnings growth since 2010. Although the massive increase may be partly due to earnings recovering from their painful levels last year, such a figure is still likely to boost confidence over JPMorgan’s outlook.
Digging deeper, investors may turn their attention towards the loan loss reserves.
Higher loan loss reserves in 2020 highlighted serious concerns about a global economic recession. In a single sentence, the loan loss reserve is the amount banks set aside to cover estimated losses on loans due to defaults. These measures hit earnings as banks set aside money to cover expected loan losses. During the final quarter of 2020, JPMorgan released credit reserves of $2.9 billion which helped boost profits. Much attention will be directed to how much it removed during the first quarter of 2021, as this will not only have an impact on its earnings number but may provide insight into how confident the investment bank is on the economic outlook.
How about the technicals?
As highlighted earlier, shares of JPMorgan are up over 21% since the start of 2021. Since the start of February, there have been consistently higher highs and higher lows on the daily charts while the MACD trades above 0. However, it seems prices have been trapped within an $8 range over the past few weeks with support at $149.00 and resistance at $157.00.
If the first-quarter earnings meet or exceed the market expectations, this may push the bank's shares towards the $157.00 resistance level. A solid breakout above this point could open doors back towards the all-time high of $161.58 as seen on the FXTM MT4 terminal. Should $157.00 prove to be reliable resistance, a descent towards $149.00 and possibly lower could be on the cards.
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