JPMorgan Paints a Dismal Picture With Its Earnings Report

With the first full week of quarterly earnings season coming to a close, many Wall Street analysts and financial market experts have concluded the earnings reports have been decent and actually great in many ways. However, there are a few underlying concerns that are not making their way into the mainstream headlines, and the results could be somewhat of a tremendous negative for equity investors.

When JPMorgan & Co. reported quarterly earnings, the figures were solid and the bulge bracket firm was quick to admire its quarterly report while offering concerns for the immediate future.

The one key element of the report that caused a bit of a ripple in the earnings celebration was the amount of late notices sent to prime mortgage holders. The Wall Street bank alarmed investors when this number increased quarter-over-quarter, thus signaling trouble for other Main Street banks, such as Citigroup and Bank of America.

Investors initially cheered the news from JPMorgan; however, the Dow Jones Industrial Average ended the day lower after eight straight advancing sessions. The previous three quarters have been extremely beneficial for JPMorgan and investors have come to depend on the company to report even better returns than what was published yesterday.

“Although we are gratified to see consumer lending net charge-offs and delinquencies decline, they remain at extremely high levels,” JPMorgan CEO Jamie Dimon said in a company statement. “It is too early to say how much improvement we will see from here.”

On the other side of earnings, search engine-giant, Google, released its quarterly figures and Wall Street has jeered the figures. The company reported that both revenue and net income rose 24% in the quarter ending June 30.

Google said its net income rose to $1.84 billion, or $5.71 a share, from $1.48 billion, or $4.66 a share. As The New York Times reported, when excluding the cost of stock options and the related tax benefits, Google’s second-quarter profit was $6.45 a share.

Though revenue beat analysts’ expectations, profit missed expectations.

“It’s an incredibly talented pony, possibly the most talented pony we’ve ever seen, but we’re waiting for that second trick,” said Jordan Rohan, a managing director at Stifel Nicolaus and an Internet and digital media analyst, to the NYT.

The company sold off after hours and will most likely trade lower on Friday. However, Google’s operating margins were closely monitored as the number dropped to 35% from 37% in the first quarter. Although the figure is healthy, it signals that the company is adding to overhead, probably in the form of added employees.

Google ad revenue seems to be occurring more overseas, as well, which can pose problems considering the headwinds they are receiving in Europe and China. Still, though, the company is trading at 15 times forward looking earnings, which could make the stock a discount at the current prices.

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