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Benzinga Weekly Preview: All Eyes on Bank Earnings

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After Alcoa’s disappointing earnings Thursday, earnings season is underway. The financial sector dominates the upcoming week, with almost every major bank expected to report.

Investor will also be paying attention to Thursday’s initial and continuing jobless claims for explain on the 63 percent miss in nonfarm payrolls. Eyes will be on Ben Bernanke Thursday as he makes one of his final statements as chairman of the Federal Reserve.

Key Earnings Reports

JPMorgan

JPMorgan’s (NYSE: JPM) earnings will be especially interesting as they company continues its legal battles. Analysts are expecting 23.82 billion in revenue and a profit of $1.33 per share.

Credit Suisse expects the company to miss the street estimate on earnings of $1.20 for the quarter.

“Our 4Q operating EPS estimate includes $600mm of litigation costs as we expect legal costs to remain elevated (inclusive of the $400mm pre-tax incremental reserve build related to the Madoff settlement in 4Q). We are revising our 2013/14 EPS estimate to $6.08 and $6.10 to reflect higher expenses than our previous forecast and we fine-tuned our capital markets assumptions.”

In contrast, Morgan Stanley thinks JPMorgan is a top pick and has a $68.00 price target on the company.

“Overweight JPM on expectations for improving credit, efficiency and client wallet share – all driving upward EPS revisions along with rising ROEs. Improving credit, share gain, capital return lift 2015 EPS 54% vs 2013. Together, these should boost ROE from 8.3% in 2013 to 11.3% in 2015.”

Bank of America

After JPMorgan’s report Tuesday, investors will be closely watching Bank of America (NYSE: BAC) Wednesday. The company is expected to make $0.27 per share on revenue of 21.31 billion.

Morgan Stanley is bullish on the company with an Overweight rating at $20 price target. MS cites falling expenses.

“Overweight JPM on expectations for improving credit, efficiency and client wallet share – all driving upward EPS revisions along with rising ROEs. Improving credit, share gain, capital return lift 2015 EPS 54% vs 2013. Together, these should boost ROE from 8.3% in 2013 to 11.3% in 2015.”

Credit Suisse on the other hand expects a small earnings miss. This is largely due to an expected eight percent year over year drop in core fee revenue.

Goldman Sachs

Investment bank Goldman Sachs (NYSE: GS) is expected to post revenue of 7.58 billion and EPS of $4.20 on Thursday. Goldman’s performance is regarded as a good measure of investment banking performance.

Analysts are split on Goldman with price targets ranging from $155 to $200.

Guggenheim, who is bullish on Goldman with a $200 price target stated in an early December note, “Until short-term interest rates are expected to rise soon or regulators loosen their grip on excess capital, we believe investors should begin to be more selectively focused on banks with the potential for earnings momentum and a relative discount in valuation.”

Citigroup

Citigroup (NYSE: C) is also expected to report on Thursday. Analysts are expecting EPS of $1.08 on revenue of 18.54 billion.

Almost all analysts are bullish on Citigroup, largely because of current multiples. Bank of America, who calls it a top pick, expects shares to reach $65:

“C fits well with the themes for 2014 outperformance laid out by BofAML’s Equity Strategy team, which include: self-help recovery story, global exposure, GDP sensitivity, and high (but declining) beta. In our view, at this stage of US economic recovery, investors should own the US-based, globally exposed (C derives almost 2x more of its revenues internationally than the S&P average) bank stock trading below tangible book that has plenty of capital and is also a ‘self-help’ story.”

General Electric

Moving away from financials, General Electric (NYSE: GE) is one of the most important companies to report next week. Wall Street is looking for EPS of $0.53 and revenue of 40.22 billion.

Oppenheimer recently downgraded the stock to perform calling 2014-2015 a transitional period for the company.

On the other hand, S&P Capital IQ has a buy rating on the company, stating:

“We see GE as well positioned for growth supplying high technology products and services critical for economic development across the globe. We see results as aided by two primary longer-term trends: credit market improvement and improving global demand in longer-cycle infrastructure businesses such as power generation, energy management, and exploration and jet engines as global growth trends pick up.”

Economic Releases

The three notable economic data points that have a chance of stirring investors amid earnings season are retail sales, initial jobless claims, and continuing jobless claims. Investors should also be aware that investors may use economics to justify selling positions if the market turns down.

Daily Schedule
Monday

  • Economic Releases Expected: Treasury Budget

Tuesday

  • Earnings Expected From: Wells Fargo & Company (NYSE: WFC), JPMorgan (NYSE: JPM),
  • Economic Releases Expected: Retail sales, Export and import prices, and Business inventories

Wednesday

  • Earnings Expected From: Bank of America (NYSE: BAC), Kinder Morgan (NYSE: KMI), Plexus (NASDAQ: PLXS)
  • Economic Releases Expected: PPI, Core PPI, Crude inventories, Federal Reserve’s Beige Book

Thursday

  • Earnings Expected From: Goldman Sachs (NYSE: GS), BlackRock (NYSE: BLK), Citigroup (NYSE: C), PNC Financial Services (NYSE: PNC), Capital One Financial (NYSE: COF), Intel (NASDAQ: INTC), American Express (NYSE: AXP)
  • Economic Releases Expected: Initial and Continuing jobless claims, CPI, Core CPI, Philadelphia Fed, Natural gas inventories

Friday

  • Earnings Expected From: Morgan Stanley (NYSE: MS), General Electric (NYSE: GE)
  • Economic Releases Expected: House starts, Building permits, Michigan sentiment, JOLTS job openings

Posted-In: Bank of America Goldman Sachs JP Morgan Morgan StanleyNews Previews Economics Pre-Market Outlook Best of Benzinga

 

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