How to play JPMorgan Chase Q2 earnings results

Investors are cautiously waiting as major US banks prepare to announce their quarterly results in a low-interest rates environment.  JPMorgan Chase (NYSE: JPM) will report its second-quarter earnings results before the opening bell on Tuesday, July 16. Let’s take a quick look at what to expect.

Despite major headwinds, the Wall Street projects Q2 earnings of $2.50 per share, compared to $2.29 per share in the year-ago period. However, it may be noted that this estimate was twice lowered in the past one month from the initial estimate of $2.54, suggesting increased caution. The Fed’s decision to lower interest rates is likely to have squeezed margins for the largest US bank.  

In the past four quarters, JPMorgan has surprised the Street on three occasions, with an average surprise rate of 2.5%.

JPMorgan Chase is expected to report revenues of $28.91 billion in Q2, a modest 1.8% growth from last year. Revenue growth during the quarter was hindered by the inverted Treasury yield curve and lackluster growth in the global economy.

The Consumer and Community Banking segment is likely to continue its strong growth on the back of high consumer confidence, which in turn, improves demand for loans. The credit card business is also going strong, helped by the popularity of its Sapphire card among millennials as CEO Jamie Dimon had earlier pointed out.      

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However, investors will be looking to hear from Dimon any contingency measures to maintain profits in the instance of a bear market.

The corporate and investment bank division may have benefited from a solid IPO market and a few big mergers, but slow trading that continued into the second quarter could have offset some of the benefits.  Investors will be curiously watching how much the CEO was able to plug the weakness in trading revenues.

Separately, look out for any updates on the bank’s own regulated crypto-currency, which it had announced, would be launched later this year. Any major announcement in this regard could have a major impact on the stock.

JPM has a Moderate Buy rating on the street, with an average annual price target of $120.17 according to TipRanks. This suggests a 4.5% upside from the last close.

JPM shares have gained 15.7% in the year-to-date period and 7.4% in the trailing 12 months.

Competitors Wells Fargo (NYSE: WFC) and Goldman Sachs (NYSE: GS) are also reporting financial results on the same day.

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