JPMorgan Chase: Financial Winner

NEW YORK ( TheStreet) -- JPMorgan Chase ( JPM) was the winner among the largest U.S. financial names on Friday, with shares rising 3% to close at $42.56.

The broad indexes ended mixed, despite a report by the Bureau of Labor Statistics on that U.S. nonfarm payrolls grew by 146,000 during November, greatly exceeding the consensus expectation among economists of a 93,000 rise in employment, according to a Reuters survey.

The U.S. unemployment rate in November declined to 7.7%, which was its lowest level since December 2008. Economists had expected the unemployment rate to stay at 7.9%.

Private service-providing industries saw their payrolls grow by 169,000 during November, mostly in trade, transportation and utilities, with 69,000 added positions, while 52,600 retail positions were added. There was a net loss of 12,300 food manufacturing jobs, which was not surprising, following the closing of Hostess, which led to the loss of 18,000 jobs.

One of the weaker categories for employment growth was in the "financial activities" category, which reflected the continuing efforts by large banks to trim their payrolls and cut expenses.

The fiscal cliff continues to loom large in investors' minds, partly overshadowing the good news on the employment front. Assuming that President Obama and the Republican leadership of the House of Representatives are unable to come up with a new compromise to avert the mandated expiration of tax cuts enacted when George W. Bush was president, along with concurrent federal spending cuts, Jim Cramer wrote that "the layoffs that the cliff necessitates will make the creation of 100,000 jobs pretty meaningless."

Apple ( AAPL) resumed its slide on Friday, declining 3% to close at $533.25. The shares have dropped 24% since their closing high of $702.10 on Sept. 19.

Apple's shares don't appear overly priced, at 11 times the consensus fiscal 2013 earnings estimate of $49.26, among analysts polled by Thomson Reuters. Then again, the consensus EPS estimate for the fiscal first quarter ended Dec. 31 is $13.32 (including options expenses), which indicates a "holiday quarter" decline from $13.87 from a year earlier.

That's quite a change in momentum for Apple, which has seen very strong year-over-year earnings growth during its first fiscal quarter for the past four years.

Moving back to the financials, the KBW Bank Index ( I:BKX) rose over 1% to close at 49.33, with all but four of the 24 index components ending the week with gains.

JPMorgan and the Fiscal Cliff

JPMorgan Chase's shares have now returned 32% year-to-date, following a 20% decline during 2011.

The shares trade for 1.2 times tangible book value, according to Thomson Reuters Bank Insight, and for eight times the consensus 2013 earnings estimate of $5.30. The consensus 2014 EPS estimate is $5.69.

Based on a quarterly payout of 30 cents, the shares have a dividend yield of 2.82%.

Guggenheim analyst Marty Mosby on Friday said in a report that for large-cap banks, "earnings per share could remain relatively flat in 2013 if impacts from Fiscal Cliffs push the economy back into a mini-recession," but under that scenario, earnings would bounce back by over 25% in 2014, "as a traditional bank recovery would ensue once the economy regained its current momentum."

Under his "baseline" scenario, with the fiscal cliff being averted, Mosby estimates that JPMorgan Chase's revenue will be flat in 2013 from 2012, but that efficiency improvements and share repurchases will lead to an increase in earnings per share of 9%. Under his "recession" scenario, Mosby sees JPMorgan's revenue declining by 3%, with EPS still growing by 7%.

Mosby rates JPMorgan Chase a "Buy," with a $55 price target, and is out in front of the consensus, estimating the company will earn $5.60 a share in 2013, increasing to $6.60 in 2014.

JPM Chart JPM data by YCharts

Interested in more on JPMorgan Chase? See TheStreet Ratings' report card for this stock.


-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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