US Bank’s Earnings Are Expected To Be “Grim”
$BAC, $C, $JPM, $WFC
Overall analysts expect US banks to post “grim” results when their earnings season gets under way this week.
But, then the fine print in the results, and what bank CEOs say, may help these stocks bounce back.
4 of the S&P 500’s top-weighted banks: J.P. Morgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC) and Citigroup (NYSE:C), are set to report dismal Q-1 revenues and profits starting Wednesday.
Financial sector analysts expect Q-1 reports to show a 9.2% decline in earnings and a 0.2% rise in sales.
The financials have been the worst performing S&P 500 sector YTD, down 8% Vs broader S&P 500 at flat.
Bank shares are cheap compared to the rest of the market.
Companies in the S&P financial sector are selling at roughly 12.8X estimated earnings over the next 12 months, compared with 16.7X forward earnings for the broader S&P 500.
The sector has been troubled since the global financial crisis as banks have battled prolonged low interest rates, faced an onslaught of pricey government reforms, and lending to risky Oil & Gas companies.
It will not be easy for banks to make the case that their shares are a good buy in here.
Investors will looking for notes about the type of exposure banks have to the tight oil (shale) energy sector, which is facing its 1st Quarterly loss in 10 years, according to Thomson Reuters data, and is expected to be the biggest drag on the S&P 500.
Investors will also look for signs of strength in banks’ investment and trading arms. Any constructive comments on the capital markets outlook would be well-received given the very challenging operating scenario in Q-1.
Earnings week begins in earnest across all sectors Monday. Looking at the broad S&P 500, analysts’ forecasts have been reduced to lows so that many companies are likely to beat estimates despite weak earnings.
Have a terrific weekend.
Paul Ebeling
HeffX-LTN
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