Two Market-Moving Banks Report: How They Compare

NEW YORK (TheStreet) -- Banks are always in the news, and this week features earnings reports from two leading financial powerhouses.

Any surprises by either can move the entire market, so we will have double the chance of a market event.

J.P. Morgan Chase (JPM)

Background: J.P. Morgan is a leading global financial services firm. The company was founded in 1823 and is headquartered in New York City. It trades an average of 48.7 million shares per day and has a market cap of $130.9 billion.

52-week high: $46.27, 52-week low: $28.38, book value: $49.64

J.P. Morgan is expected to report weak second-quarter earnings before the market opens Friday. The consensus estimate is currently 85 cents a share, a decline of 42 cents (33.1 percent) from $1.27 during the same period last year.

Analysts as a whole like this company. Currently, JPM has 17 "buy" recommendations out of 24 analysts covering the company, five "holds" and two recommend selling.

Thirteen out of 24 analysts now rate JPM a "strong buy," down from 14 analysts a month ago. Compared to three months ago, fewer analysts are rating this company as a strong buy.

Shareholders have not been rewarded for their patience. Shares have fallen 16.8 percent in the last year, and the average analyst target price for JPM is $46.50.

The trailing 12-month price-to-earnings ratio is 7.6, the mean fiscal-year estimate price-to-earnings ratio is 7.97 based on earnings of $4.31 per share this year. Investors are receiving $1.20 in dividends for a yield of 3.49 percent.

For the same fiscal period year-over-year, revenue has improved to $102.69 billion in the last fiscal year compared to $100.43 billion in the previous year. The bottom line has rising earnings year-over-year of $17.37 billion in the last fiscal year compared to $11.73 billion in the previous year.

The closing price before JPM's previous earnings release on April 13 was $44.84. Shares fell $1.63 (3.6%) after the earnings, and have continued to fall. Since the last earnings release, JPM is down $10.84 (24%). In the last month the stock has climbed 4.79%.

( TheStreet's Doug Kass wrote a Real Money article that includes JPM, Curbing My Enthusiasm.You need a Real Money Pro subscription, but if you don't have one take a look at the free trial offer so you can read it.)

US Bancorp ( USB) is another bank I like and compare to JPM. Below I have a table comparing the various banks. I use USB for my own banking because one of the best financial advisers I know, Travis Kraker, works there. I am not a client of his, but he is the guy I recommend people seek out. (Read my recent banking article.)

JPM beat earnings in three of the last four quarters, with one miss for -0.02 cents (-2.17%) per share. The trading losses are baked into the cake and Wall Street will look at guidance to signal the direction.

Unless shares can break above the 200-day moving average (currently at $36.41) and stay above for at least two days, we will continue to watch this bank trade in a bear market.

Weinstein Estimate: I expect a modest beat but attenuated guidance will likely prevent a meaningful rebound.

Wells Fargo (WFC)

Background: Wells Fargo is a diversified financial services company based in San Francisco providing banking, insurance, investments, mortgage and consumer finance services. Wells Fargo trades an average of 23.8 million shares per day and has a market cap of $176.1 billion.

52-week high: $34.51, 52-week low: $22.88, book value: $27.45, price to book: 1.3

Wells Fargo is expected to report good second-quarter earnings before the market opens on Friday. The consensus estimate is currently 81 cents a share, an improvement of 11 cents (13.6 percent) from 70 cents during the same period last year.

Analysts approve the direction WFC is headed. Twenty of the 24 analysts covering the company give a "buy" recommendation, three analysts rate it a "hold" and one recommends selling. The stock has appreciated 15.6 percent in the last year, and the average analyst target price for WFC is $38.

Bank Of America ( BAC) is also above the 200-day moving average, but has recently tested the moving average and is finding it difficult to stay above.

Bank Of America has a higher price multiple along with a schizophrenic earnings history. BAC may be great if you want to trade, but for investors wanting to build long-term value Wells Fargo is a good choice.

In the last month BAC climbed 5.39%, but investors may be facing $7 a share again. ( TheStreet's Sham Gad wrote a Real Money article that includes BAC and you can read it here.)

Wells Fargo's trailing 12-month price-to-earnings ratio is a very low 11.4 and the mean fiscal-year estimate price-to-earnings ratio is 10.12 based on earnings of $3.28 per share this year.

Investors are receiving 88 cents in dividends for a yield of 2.66 percent. It's just a matter of time before others figure out what a bargain this bank is.

In the last month Wells Fargo stock has climbed 6.25%, and I expect the stock to keep appreciating. The analyst target price of $38 appears very reasonable.

Revenue year-over-year has decreased to $93.25 billion in the last fiscal year compared to $98.64 billion in the previous year. The bottom line has falling earnings year-over-year of $12.66 billion in the last fiscal year compared to $12.67 billion in the previous year.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

At the time of publication the author did not have a position in any of the stocks mentioned.

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