The Big Banks Kick Off Earnings Season Next Week – Here's What You Should Expect Dear Reader, It’s T-minus one week until the fourth-quarter earnings announcement season begins!
Longtime readers know that earnings season is my favorite time of the year. This is when companies must open their books and share their latest quarterly results with Wall Street. Companies that post strong earnings and sales results are typically rewarded, while companies that miss expectations are usually punished.
Now, the third-quarter earnings season ended up being a good one for Wall Street. The analyst community estimated that earnings would decline in the third quarter. Instead, earnings increased by 13.9%!
The bar is set low for this earnings season, too. According to FactSet, earnings are expected to rise 2.4% in the fourth quarter. So, the earnings bar is set relatively low, which means we could be in for some big earnings surprises.
The big banks will kick off the earnings season on Friday. We’ll hear from Bank of America Corporation (BAC), JPMorgan Chase & Co. (JPM) and Wells Fargo Company (WFC).
Personally, I’m not a fan of the big banks. That’s because I am an ex-banking regulator. Back in the late 1970s and early 1980s, when the yield curve was severely inverted, I used to merge two money-losing financial institutions together so they could qualify for FSLIC or FDIC insurance. Essentially, I would take the largest financial institution and merge it into the smaller one, but would re-amortize its assets (e.g., loan portfolio) to make the combined financial institution look better.
Even though I could never fix the combined financial institution’s cash flow, I helped them kick the can down the road, since an inverted yield curve is lethal for banks. In other words, I used to put lipstick on a pig. My experience scarred me for life, which is why I rarely recommend banks.
But with the big banks’ third-quarter earnings reports up on deck next week, I’d like to use today’s Market 360 to preview their earnings results. I’ll also share another way to get a “sneak peek” at earnings reports… each and every quarter.
Bank of America Bank of America is forecast to post earnings of $0.67 per share on revenue of $24.03 billion, down from earnings of $0.85 per share and revenue of $24.66 billion. That translates to a 21.2% year-over-year earnings decline and 2.5% year-over-year revenue decline. I should also add that earnings estimates have been revised 10.7% lower in the past three months, so an earnings miss is likely. JPMorgan Chase & Co. JPMorgan Chase is also expected to post lackluster earnings. Earnings are projected to slip 0.8% year-over-year to $3.53 per share, down from earnings of $3.56 per share in the same quarter a year ago. Revenue is anticipated to increase 11.8% year-over-year to $39.77 billion, up from $35.57 billion. Earnings estimates have fluctuated over the past 90 days. Wells Fargo Company Wells Fargo’s earnings are shaping up to be better than Bank of America’s and JPMorgan Chase’s. For the fourth quarter, analysts are calling for earnings to surge 101.6% year-over-year to $1.23 per share. Revenue is expected to rise just 3.4% year-over-year to $20.34 billion. This is up from earnings of $0.61 per share and revenue of $19.66 billion in the third quarter of last year. Earnings estimates have also been revised 7.9% higher in the past three months, so a fourth-straight earnings surprise could be in the cards.
I should also note that the banks’ earnings are all expected to post a quarter-over-quarter decline. BAC reported earnings of $0.83 per share in the second quarter, which represents a 19.3% quarter-over-quarter drop. JPM’s earnings are forecast to fall 13.6% quarter-over-quarter, and WFC’s earnings are anticipated to fall 17.6% from the last quarter. How to Find the Next Big Earnings Winners As a numbers guy, I enjoy digging into past financial statements or poking around financial websites to see not only if a company is likely to grow its earnings, but if the analyst community expects the company to post strong earnings growth, too. If the analyst community is raising its earnings estimates, that's a good thing. But if the analyst community is lowering its earnings estimates – like it is with Bank of America and JPMorgan Chase – then that’s a bad sign and signals that an earnings miss is possible.
Now, if you don't want to spend your day reading through all the data, there is another way to get a leg up on earnings season... thanks to a powerful system created by senior analysts Landon Swan and Andy Swan.
As you may recall, they are the founders of LikeFolio and the brains behind Derby City Insights. Landon and Andy are considered the go-to resources for earnings season trading expertise. They’ve been trading earnings for more than two decades… and their research has been featured on Fox Business, CNBC, Barron’s and Investor’s Business Daily.
Landon and I recently met to chat over his latest work that incorporates artificial intelligence. I believe what Landon has built is one of the most technologically advanced quantitative trading systems I’ve ever encountered.
We want all investors to know about it, too, which is why we’re holding a special event: The A.I. Earnings Predictor Summit. We’re hosting it next Tuesday, January 9, 2024, at 8 p.m. Eastern time. (You can click here to reserve your spot now.)
With the fourth-quarter earnings season just about to start, you’ll definitely want to tune in to hear what we have to say if you want to learn how to profit from it. The reality is there will be a ton of opportunities to make big money in the next 10 weeks, and we don’t want you to miss out.
Reserve your spot for this special event now. Sincerely, |
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