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Analysts Pour Praise on JPMorgan, Wells Fargo (Update 1)

UBS analyst Brennan Hawken on Monday stuck with his "buy" rating for JPMorgan, while raising his price target to $62 from $57. Hawken raised his 2013 EPS estimate for JPM by a dime to $5.75, but lowered his 2014 EPS estimate by a nickel to $5.95, "driven by a [lower net interest income] starting point and lower mortgage revenues." In a note to clients, Hawken wrote "JPM remains the strongest franchise in the group, and we believe they should continue to take share."

Sterne Agee analyst Todd Hagerman on Monday maintained his "buy" rating for JPMorgan Chase, while raising his price target by a dollar to $65, implying a stock multiple of 10.4 times his 2014 EPS estimate of $6.30. Horowitz raised his 2013 EPS estimate by a dime to $5.90, raised his 2014 EPS estimate by 15 cents, and introduced a 2015 EPS estimate for JPMorgan of $6.80.

"Notwithstanding the challenges, with JPM trading at a discounted ~9x forward earnings, we believe the shares are poised for multiple expansion given the earnings tailwinds into '14, including expectations for an incrementally higher absolute capital return to shareholders," Hagerman wrote in a note to clients.

JPMorgan's shares closed at $54.97 Friday. The shares have returned 28% this year, following a 36% return during 2012. The shares trade for 1.4 times tangible book value, according to Thomson Reuters Bank Insight, and for 9.2 times the consensus 2014 EPS estimate $6.00. The consensus 2013 EPS estimate is $5.76.

Based on a quarterly payout of 38 cents, JPMorgan's shares have a dividend yield of 2.77%. Following the Federal Reserve's annual stress tests for the largest U.S. banks in March, the company was approved to repurchase up to $6 billion in common shares through the first quarter of 2014. JPMorgan's shares repurchases during the second quarter totaled $1.2 billion.

Wells Fargo

Mutascio reiterated his "market perform" rating for Wells Fargo, while raising his price target for the shares to $46 from $43. The analyst on Sunday also raised his 2013 EPS estimate to $3.91 from $3.74, and his 2014 EPS estimate to $4.15 from $3.93. KBW's price target for Wells Fargo represents "fail value" of 11 times the firm's 2014 EPS estimate, Mutascio wrote.

FBR analyst Paul Miller on Monday reiterated his "outperform" rating for Wells Fargo, while sticking with his price target of $50. Miller raised his 2013 operating EPS estimate for the bank to $3.74 from $3.63, and maintained his 2014 EPS estimate of $3.90. Miller in a note to clients on Monday wrote "the company reported another quarter of solid mortgage-banking results as originations remain elevated and gain-on-sale declined less than expected."

Wells Fargo also bucked the expected industry trend, with mortgage loan originations increasing to $112 billion during the second quarter from $109 billion during the first quarter.

Hagerman maintained his "neutral" rating for Wells Fargo on Monday, although he raised his price target for the shares to $44 from $42. The analyst raised his 2013 EPS estimate to $3.85 from $3.65, while raising his 2014 EPS estimate to $4.10 from $4. Hagerman also introduced a 2015 EPS estimate for Wells Fargo of $4.40.

In a note to clients, Hagerman wrote that his outlook for Wells Fargo "remains positive, but we see the shares now as largely fairly valued given our expectations for moderating growth, at least over the next few quarters."
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