This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Analysts Give JPMorgan a Pass on Unknown Legal Expenses

Stocks in this article: JPM

NEW YORK ( TheStreet) -- Analysts remain stubbornly bullish on JPMorgan Chase (JPM) despite the bank's mounting legal bills.

CFO Marianne Lake on Monday said during an investor presentation that the bank's legal expenses in the third quarter could top $1.5 billion following a "crescendo of activity" in the past few weeks, erasing the benefit from loan loss reserves.

The bank's mortgage origination business could see a loss in the third and fourth quarter. And markets revenue in the third quarter could be flat to down 5% from a strong third quarter of 2012.

Analysts on Tuesday took down their earnings estimates for the bank following the fresh guidance, but many reiterated their "buy" ratings citing attractive valuations.

KBW analyst Chris Mutascio lowered his third quarter earnings estimate to $1.12 a share from $1.45, to factor in the higher legal expenses of $1.67 billion. KBW's full year 2013 estimate was lowered to $5.70 from $6.11. "We think it is prudent to carry forward some legal reserve builds despite the projected sizable build up we expect in 3Q13. Until the recent litigation actions are settled or we get more information from management, we think it is prudent to increase litigation costs over the next several quarters," Mutascio wrote in a report.

Still, he maintains an "outperform" rating on the stock. "In an environment where investors are willing to potentially wait years for short-term interest rates to rise and net interest margin to expand while bidding up 'asset-sensitive' bank stocks in anticipation, we are willing to buy the shares of JPM at a significantly discounted valuation knowing legal costs will eventually fall. Despite our earnings revisions, JPM shares still trade at just 8.9x our 2014 EPS estimate of $5.95. Our $63 target price represents just 10.6x our 2014 EPS estimate (we have yet to publish 2015 EPS estimates) and 19% potential upside potential -- not including a dividend yield of nearly 3.0%," he wrote.

Atlantic Equities analyst Richard Staite also lowered estimates on a "noisy" quarter but retained his positive outlook. "We think the shares are attractively valued on a 2014 PE of 8.6x with the main catalyst to a re-rating being a reduction in the litigation overhang," he wrote in a note to clients.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,098.15 +67.94 0.38%
S&P 500 2,089.11 +7.23 0.35%
NASDAQ 4,793.2090 +19.7370 0.41%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs