JPMorgan Chase 4Q Earnings: What to Expect

NEW YORK ( TheStreet) -- Wall Street has its fingers crossed that JPMorgan Chase's ( JPM) Friday earnings report will include long-awaited guidance on when a dividend raise could come - and by how much.

JPMorgan is the first big bank to report earnings. It's also among the handful of banks that are expected to receive approval from the Federal Reserve to put capital toward dividends or aggressive buybacks in the near term.

Investors are already getting some positive news. CEO Jamie Dimon said on Tuesday that he would like to increase the dividend in the second quarter. That statement helped to give the stock in lift in yesterday's trading.

"On top of likely higher dividends, we continue to think a 10% share buyback announcement in 1Q11 is possible," Deutsche Bank analyst Matt O'Connor says in a recent report. He expects JPMorgan to quadruple its quarterly dividend to 20 cents per share at some point this quarter, up from the current level of 5 cents per share.

Investors have been anticipating such a move for a while now - with some having expected similar dividend raises a year ago, only to be disappointed. Over the past 52 weeks, JPMorgan's stock has moved from roughly $44.25 to below $36 during the summer, only to climb back above $44 in recent sessions in advance of the profit report.

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Oliver Pursche, president at Gary Goldberg Financial Services and manager of the GMG Defensive Beta Fund ( MPDAX), suspects that some type of dividend raise has been priced in - the question is how much of one.

"On a JPMorgan Chase for example, I think that yes, that's priced in to an extent," said Pursche, talking about dividends in financial stocks generally. "That doesn't mean that they can't raise it significantly enough where it would still cause a pop."

It's unclear what the broad investment community expects, but the average price target among analysts of $52.74 per share indicates that JPMorgan has some room to run if its results are strong enough and management is optimistic enough about the firm's outlook. Of 27 analysts who rate the stock, 23 rate it a buy or strong buy and four suggest clients merely hold shares without adding to their positions; none rate it a sell.

JPMorgan bulls are hoping that its investment bank has been strong enough to offset sluggish results in JPMorgan's consumer-banking business.

Early signs are encouraging: JPMorgan bested competitors like Goldman Sachs ( GS), Morgan Stanley ( MS), Citigroup ( C) and Bank of America ( BAC) to top investment banking league tables last year in terms of fees, according to outlets that track deal fees. JPMorgan took in $5.4 billion, or 6.4% of deal volume, last year, according to Thomson-Reuters -- beating No. 2 competitor, BofA-Merrill, by a healthy margin.

Still, JPMorgan's fees fell 11% from the previous year, with better M&A advisory and equity underwriting results apparently unable to make up for the decline in fixed-income trading.

Analysts expect JPMorgan to report fourth-quarter earnings of 99 cents per share on revenue of $24.4 billion, on average, according to Thomson-Reuters. That would be higher earnings than a year ago, but a decline from the previous quarter. The revenue estimate represents a decline over either time period.

JPM Securities analyst David Trone thinks that strength in the equities market should bode well for JPMorgan going forward. Combined with ongoing reserve releasing and credit improvements, the bank is certainly back on solid ground. However, Trone remains cautious over ongoing headwinds in the mortgage space - from foreclosure pile-ups to mortgage putbacks - as well as new regulatory reforms that will curb earnings growth.

"We expect revenue to rise just 1% sequentially to $24.57 billion as improvement in the Investment Bank unit (+14%) should be mitigated by seasonally weaker Retail Financial Services (-3%), while other units are expected to remain flattish," Trone said in his note. The analyst rates JPMorgan shares market perform.

However, other analyst believe that incremental improvements in the consumer business, combined with a strong investment banking arm and a potential dividend raise render the stock a buy. O'Connor rates JPMorgan his top pick among money center banks, which also include Bank of America and Citigroup, noting that the stock is now trading at 8 times his "normal" earnings estimate, vs. the broader group at 10 times EPS.

"We believe a meaningful boost to the dividend and share repurchase program may be announced in 1Q11 or early 2Q11," says O'Connor.

-- Written by Lauren Tara LaCapra in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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