JPMorgan Chase (NYSE:JPM) Sets A High Bar, Again

We noted on Monday how bright the outlook for some bank stocks is as we enter 2020 and we got a glimpse into the reality of this when JPMorgan Chase NYSE: JPM released their Q4 earnings yesterday before the open. Earnings and revenue both comfortably beat analyst expectations with the latter registering a growth of 8% year over year. Net income also came in hot while revenue from trading perked up as well. As Wolfe Research pointed out, these numbers were all the more impressive considering they included significant write-downs on some legacy private equity projects.

JPM has been in good form with its earnings in recent years and has made a habit of beating analyst expectations. Over the past 2 years specifically, they’ve beaten the EPS and revenue consensus numbers 88% of the time. They also carried solid momentum into Tuesday’s release with 11 analyst upgrades in the 3 months previous. This might help to explain why the stock has been on a tear since last September when it broke out of the range it’d been stuck in since January 2018. The 30% that shares have tacked on in the months since came with multiple fresh all-time high tags and it looks like they’re eager to continue this trend into the new year.

Jamie Dimon, the company’s CEO, commented on the company’s results: “JPMorgan Chase produced strong results in the fourth quarter of 2019, capping off a solid year for the Firm where we achieved many records, including record revenue and net income. While we face a continued high level of complex geopolitical issues, global growth stabilized, albeit at a lower level, and resolution of some trade issues helped support client and market activity towards the end of the year. The U.S. consumer continues to be in a strong position and we see the benefits of this across our consumer businesses.”

Leading The Pack

JPM is considered to be one of the ‘Big 4’ banking names and it’s hard to doubt leadership’s optimism when you compare their stock’s performance against that of their peers. In the past decade, shares of JPM have rallied a blistering 250%. Citi NYSE: C and Bank of America NYSE: BAC are the next closest with around a 140% rally each. Goldman Sachs NYSE: GS and Wells Fargo NYSE: WFC both lag heavily with less than an 80% rally in their shares over the same ten years. Even when we compare this group over the past 12 months or the previous five years, JPM is still far and away the best performer.

Even though Wolfe Research noted that some of JPM’s competitors appear to be offer ‘better relative value’, the tape and the graphs don’t lie. Perhaps JPM has been weathering the headwinds that face the banking sector better than most. We’re in a low-interest-rate cycle which hurts banking profits and given we’re in an election year, there’s always the chance that the threat of fresh industry regulations will dampen outlooks. But the upside to banks tends to outweigh the downside right now. 

Getting Involved

For those looking to get involved with banking stocks, there’s more to them than just equity appreciation. Their dividends are often very attractive and JPM, in particular, offers a solid 2.6% yield. Bank stocks tend to be less volatile than other industries like consumer discretionary or energy which can be cyclical and seasonal.

Technically, JPM’s stock chart is very much intact. After printing their most recent fresh high on January 2, shares pulled back, consolidated and then jumped back up yesterday. It will be interesting to see how they perform throughout the rest of the week given they didn’t finish at their daily high despite the impressive beat. If they were to dip under the $135 mark, we’d likely see some profit-taking but if anything this would be a great buying opportunity.

They’ve consistently distinguished themselves as the leading bank stock in the decade after the 2008 crash and all signs point to them holding onto the title for a while yet.