A Higher Multiple Ahead?
Oppenheimer analyst Chris Kotowski on Wednesday said in a report that there was a change in tone at Tuesday's Investor Day meetings from previous years. "There always seemed to be a cadre of attendees whose questions seemed to betray a view that surely the industry was just kicking the can down the road and was in reality surely on the precipice of calamity," he wrote. At this year's Investor Day, the negative tone "was replaced by ticky-tack fine grain detailed questions about cost saves, branch builds, corporate culture and the like," Kotowski wrote. JPM CEO James Dimon made it clear that the company was focused on becoming more efficient, and said that major acquisitions were "pretty much off the table." The bank has a goal of $1 billion in annual cost savings, through various efficiency improvements and the elimination of roughly 4,000 jobs. Kotowski called the items JPMorgan focused on during Investor Day, "boring stuff that probably bespeaks a likelihood of higher multiples." The analyst rates JPMorgan "outperform," with a 12-18 month price target of $64.00, estimating the company will earn $6.02 a share this year, with EPS rising to $6.50 in 2014. "JPM remains our favorite name in the group at this juncture as we cannot normally find this kind of quality at 8x our estimate (or 9x consensus)," he wrote.
Next: Stress Test Results
The Federal Reserve will announce the results of its annual stress tests on the nation's largest banks on March 7. These results will gauge the banks' ability to withstand a "severely adverse scenario" that includes a brutal recession beginning this year, while still remaining well capitalized. The more important date for investors is March 14, when the Fed announces the results of the Comprehensive Analysis and Review (CCAR) of the banks' capital plans through the first quarter of 2014. JPMorgan Chase is paying a quarterly dividend of $0.30 a share, which translates to a yield of 2.52% based on Tuesday's closing share price. Bank of America Merrill Lynch analyst Erica Penala in a report on Wednesday said that her earnings estimates for JPMorgan assume "$5bn in dividends and $10bn in share buybacks" during 2013, with the quarterly dividend rising to $0.32. Penala rates JPMorgan a "buy," and on Wednesday raised her price objective for the shares to $55.00 from $52.00. The analyst also raised her 2013 EPS estimate to $5.85 from $5.70 and her 2014 EPS estimate to $6.00 from $5.92, based on expectations of net income "stability" and a "continued reserve release" in JPMorgan's credit card business. "JPM remains the cheapest P/E stock in our coverage universe" based on her firm's estimates, Penala wrote, adding that "if the market continues to sell risk, JPM should outperform its peers." -- Written by Philip van Doorn in Jupiter, Fla. >Contact by Email. Follow @PhilipvanDoorn