JPMorgan Chase: Financial Winner

NEW YORK ( TheStreet) - JPMorgan Chase ( JPM) was the winner among the largest U.S. financial companies on Thursday, with shares rising over 1% to close at $49.22.

The broad indexes ended mixed again. The S&P 500 ( SPX.X) index has now risen 7% year-to-date. A sure sign of a strong market and increased confidence in the U.S. economic recovery is the number of recent large M&A deals, including Thursday's announced agreement for Warren Buffett's Berkshire Hathaway ( BRK.B) to combine with 3G Capital in paying about $28 billion in cash to acquire H.J. Heinz ( HNZ).

Other recent large M&A deals include General Electric's ( GE) agreement to sell its remaining stake in NBCUniversal to Comcast ( CMCSA) for roughly $16.7 billion in cash and stock, and the $24.4 billion offer by Michael Dell and private equity investors to take Dell ( DELL) private.

The Labor Department reported Thursday that initial unemployment claims for the week ended Feb. 9 totaled 341,000, declining by 27,000 from the previous week's upwardly revised figure of 368,000. The consensus among economists was for initial jobless claims to come in at 363,000, according to Zacks. The four-week moving average was 352,500, an increase of 1,500 from the previous week's average of 351,000.

Continuing unemployment claims for the week ended Feb 2 totaled $3.114 million, declining by 130,000 from the previous week.

The KBW Bank Index ( I:BKX) was up slightly to close at 55.47.

JPMorgan Chase

Shares of JPMorgan Chase have returned 13% year-to-date, following a 36% return during 2012. The shares trade just above tangible book value, according to Thomson Reuters Bank Insight, and for 8.5 times the consensus 2014 earnings estimate of $5.77 a share, among analysts polled by Thomson Reuters. The consensus 2013 EPS estimate is $5.43.

Based on a quarterly payout of $0.30, the shares have a dividend yield of 2.44%.

Guggenheim analyst Marty Mosby rates JPMorgan Chase a "buy," and on Feb. 5 raised his price target for the shares to $61.00 from $55.00, while raising his 2013 EPS estimate for the company to $5.80 from $5.47 and his 2013 EPS estimate to $6.46 from $6.40.

Mosby raised price targets and earnings estimates for most of the large-cap banks covered by his firm, predicting that 2013 would be another strong recovery year for the industry, and saying in a report that Guggenheim's 2013 earnings estimates "remain about 5% higher than the market consensus, due to expected positive impacts from efficiency gains and share repurchases this year."

According to Mosby, JPMorgan, Wells Fargo ( WFC) and Winston-Salem, N.C.-based BB&T ( BBT) "could continue to exceed the market expectations for earnings through 2014 by 10% or more. Moreover, we expect each to increase their dividend, following this year's CCAR process, enough to create a dividend yield on their respective current stock prices of greater than 3%."

CCAR stands for Comprehensive Capital Analysis and Review, which is the tedious regulatory term for the Federal Reserve's annual stress test of the nation's largest financial firms. The Federal Reserve is scheduled to release the stress test results on March 14, and investors can be sure to see many big banks announce dividend increases and/or share buybacks the same day.

Mosby estimates that JPMorgan Chase will increase its quarterly payout by $0.10 to $0.40 a share, while Wells Fargo will raise its quarterly dividend to $0.30 from $0.25, with BB&T raising its dividend to $0.25 from $0.23.

Guggenheim's price target for JPMorgan Chase is based on multiples of 10.5 times the firm's 2013 EPS estimate for the bank, and on 1.4 times estimated year-end tangible book value.

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.