JPMorgan Chase exceeds profit and revenue expectations

Text size

The 2019 first quarter results season started well on Friday morning. The strength of its consumer bank division is lifted
JPMorgan Chase

record earnings and quarterly earnings both higher than analysts' forecasts.

It was an easy obstacle to overcome. These estimates had decreased by about 9% and 4%, respectively, since the beginning of the year. JPMorgan Chase (ticker: JPM) has also maintained its forecast for the entire year. Equities rose 4.7% on Friday, adding a return of nearly 16% in 2019.

This result is perhaps emblematic of the upcoming earnings season, which will be accentuated next week: Forty-six members of the S & P 500 report, followed by 134 the following week.

According to Bank of America Merrill Lynch, consensus estimates of first quarter earnings per share have fallen an average of 7% since the beginning of the year and nearly 10% since the fall. Although this makes the profit estimates for this quarter very achievable, it should also lower profits by 4% compared to the same quarter of the previous year. This would be the first decrease of this type since early 2016.

This means that the entire S & P 500 rally in 2019 can be attributed to the increase in valuation multiples.

The key question, according to
Morgan Stanley
,
This is because investors are expecting an acceleration of earnings growth later in the year, or simply because the Federal Reserve's dovish pivot at the beginning of the year justifies a multiple more high.

"As the first quarter earnings season is about to begin, the moment is right: are companies going to guide the recovery in the second half or lower the bar again?" Writes Morgan Stanley, Equity Strategist , in a report released last week. "We believe that the strong equity rally has left many management teams in a better mood, which could encourage them to remain steadfast in the second-period recovery mantra, although evidence of their existence remains uncertain. "

Maintaining the full-year forecast after a weaker first quarter means that companies are forecasting a re-acceleration of earnings for growth later in 2019. This is actually a higher bar, which could lead to disappointment for investors. investors later if earnings trends did not reverse.

Write to Nicholas Jasinski at [email protected]