JPMorgan Earnings: Here's How to Read Them

JPMorgan earnings preview updated with fresh share price information and additional forecasts in the seventh paragraph.

NEW YORK (TheStreet) -- Legal costs are a wild card while lower revenues from trading and mortgage origination are widely expected as JPMorgan Chase  (JPM) prepares to report first quarter earnings ahead of the opening bell on Friday.

Analysts are looking for the bank to earn $1.46 or $5.4 billion, on revenues of $24.49 billion, compared to $1.82 per share last quarter and $1.62 in the first quarter of 2013.

Thirty one analysts recommend JPMorgan shares, while 9 rate the bank's shares a "hold" and two have "sell," ratings according to data compiled by Bloomberg.

"Relative to 4Q13, we expect modest balance sheet expansion, a relatively stable net interest margin, lower investment banking fees, higher core trading revenues (but down from 1Q13), lower mortgage results, controlled expenses (though seasonal pressure on comp), sound asset quality trends (with continued reserve release) and higher, but still modest, share repurchase," wrote Barclays analyst Jason Goldberg in a report published Wednesday. Goldberg has an "overweight" rating on JPMorgan with a $67 price target. That compares to Thursday's close of $57.40, down 3.16% versus Wednesday's close.

While Goldberg argues legal costs for the bank "should begin to abate," FBR Capital Markets analyst Paul Miller, who rates JPMorgan Chase "neutral," cited the bank, along with Bank of America (BAC) and First Horizon National Corp. (FHN) as stocks to "avoid" based on "litigation risks and lower trading/mortgage banking revenues." Miller has a $55 price target on JPMorgan shares even though his $1.45 per share earnings estimate is higher than both the consensus figure and that of Barclays' Goldberg, who is at $1.42.

Credit Suisse analyst Moshe Orenbuch core trading revenues of $5.2 billion, down 15% from a year ago and up 27% from the traditionally weak fourth quarter. He sees both fixed income and equities trading to fall by 15% versus a year ago. Orenbuch's $1.31 earnings estimate is well below the mean, but he still recommends the shares and has a $70 price target.

As for mortgage income, Barclays' Goldberg is expecting JPMorgan to earn $1 billion in mortgage fees and related income in the quarter, compared to $1.59 billion in the first quarter of 2013 and $1.11 billion in the fourth quarter. The analyst argues the cold weather is partly responsible for what he expects will be a softer number.

Legal costs weighed heavily on JPMorgan earnings of late. The bank incurred $11.1 billion in legal costs in 2013, compared to about $5 billion per year in 2012 and 2011, according to its most recent 10-K. Orenbuch foresees $750 million in legal costs this quarter.

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