Big banks will start releasing their quarterly numbers from this week. The outlook is bearish this time thanks to the flattening of the yield curve. Let’s delve into the earnings potential of the big six banking companies that could regulate the performance of the sector ahead.
According to our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) when combined with a positive
Earnings ESP
increases our chances of predicting an earnings beat, while companies with a Zacks Rank #4 or 5 (Sell rated) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our
Earnings ESP Filter
.
Inside Our Surprise Prediction
Among the big six, JPMorgan Chase & Co.
JPM
is likely to report on Jul 14. JPM has a Zacks Rank #2 (Buy) and an Earnings ESP of +1.32%.
Bank of America
BAC
is likely to report on Jul 18. BAC has a Zacks Rank #3 and an Earnings ESP of -3.46%.
Wells Fargo & Company
WFC
is likely to report on Jul 15. WFC has a Zacks Rank #3 and an Earnings ESP of -11.13%.
Goldman Sachs
GS
is likely to report on Jul 18. GS has a Zacks Rank #3 and an Earnings ESP of -9.56%.
Citigroup Inc.
C
is expected to report on Jul 15. Citigroup has a Zacks Rank #3 and an Earnings ESP of -0.79%.
Morgan Stanley
MS
is likely to come up with its earnings release on Jul 14. Morgan Stanley has a Zacks Rank #4 and an Earnings ESP of -6.39%.
What’s in Store This Earnings Season?
As discussed above, the chances of a broad-based earnings beat are lower, thanks to the flattening yield curve. This has been reflected in the latest earnings estimates too, with Morgan Stanley’s current quarter EPS estimate of $1.62 falling from $1.63 seven days back and $1.69 one month ago.
The current-quarter EPS expectation for Goldman has fallen from $8.72 three months ago to $7.45 now. A week back, the estimate was $7.50. It was $8.43 one month ago and $8.65 two months ago. Bank of America has seen the current-quarter earnings estimate falling from $0.81 to $0.79 in the past three months.
Citigroup (C), which saw the current-quarter EPS estimates going down from $1.71 to $1.63 in the past three months. Wells Fargo has seen the current-quarter estimate falling from $0.98 to $0.84 in the last three-month period.
JPMorgan has been the only exception. It has seen the current-quarter earnings estimate rising from $2.84 to $2.87 in the past one month.
Hence, investors keeping an eye on the earnings season must be keen on knowing how financial ETFs like
iShares U.S. Financial Services ETF
IYG
,
iShares US Financials ETF
IYF
,
Invesco KBW Bank ETF
KBWB
,
Financial Select Sector SPDR
XLF
and
Vanguard Financials ETF
VFH
are placed before their earnings releases. These funds lost
0
.9%, 0.8%, 2.8%, 1.4%, 1.5%, respectively.
These funds have considerable exposure to the aforementioned stocks. Goldman has moderate exposure in the aforementioned ETFs. It is heavy on
iShares U.S. Broker-Dealers & Securities Exchanges ETF
IAI
. IAI is up 0.7% past month (as of Jul 8, 2022).
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