How to Play JPMorgan Stock After Upbeat Q1 Earnings Performance

On Friday, JPMorgan JPM announced first-quarter 2025 results before the opening bell. The company’s quarterly top and bottom-line numbers easily outpaced the Zacks Consensus Estimate.Robust markets revenues (primarily equity trading), decent advisory and debt underwriting, and a 4% rise in total loans supported JPM’s performance. On the other hand, a decline in equity underwriting, a 75% jump in credit costs and higher non-interest expenses were the undermining factors. Overall, the company’s net income grew 9% to $14.64 billion. For details, read: JPM's Q1 Earnings Top on Solid Trading & Higher Loans, Provisions Soar.Despite headwinds like the impact of tariffs on the global economy, ambiguity related to the Federal Reserve’s monetary policy and lingering geopolitical matters, JPMorgan affirmed its net interest income or NII (excluding Markets) guidance of $90 billion for this year. Additionally, management took a cautious stance on the investment banking business for the near term while expecting a turnaround in the same on the reduction of the uncertainties.As such, JPMorgan shares gained 4% following the earnings release. Its industry peers, Citigroup C and Bank of America BAC, are slated to announce their quarterly numbers tomorrow. Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.JPMorgan’s NII: Contingent on Fed’s Rate PathGiven the sticky inflation number and the current tariff-related uncertainty, market participants are predicting three to four interest rate cuts in the back half of the year. As such, JPMorgan’s NII is likely to face “headwind on an exit rate going into next year” as its balance sheet is highly asset-sensitive.The company’s NII witnessed a five-year (2019-2024) CAGR of 10.1%, mainly driven by the high-interest rate regime since 2022 and the acquisition of First Republic Bank in 2023. The momentum continued in the first quarter of 2025, driven by solid loan and deposit growth and higher revolving balances in Card Services. JPMorgan expects NII to be $94.5 billion for 2025, with almost $4.5 billion coming from Markets NII.Resurgence in Capital Markets to Support JPM in the Long RunJPMorgan’s capital markets business (that includes investment banking or IB and markets) witnessed a robust comeback last year, with IB fees (in the Commercial & Investment Bank segment) jumping 37% year over year. In 2023, IB fees declined 5% and plunged 59% in 2022. Likewise, as trading volume and market volatility remained high in 2024, markets revenues benefited and grew 7%. Despite tariff-related ambiguity and extreme market volatility, the performance of the company’s capital markets business was decent in the first quarter. IB fees grew 12% on the back of a rise in advisory fees and debt underwriting income. Additionally, the company ranked #1 with a wallet share of 9%. Further, markets revenues soared 21%, particularly driven by record equity trading income.While the near-term prospects are cloudy because of market turmoil and uncertainty over monetary policy, JPMorgan expects a rebound once there is less uncertainty in the markets. Jeremy Barnum, the company’s chief financial officer, during the earnings conference call, said, “In light of market conditions, we are adopting a cautious stance on the investment banking outlook. While client engagement and dialogue is quite elevated, both the conversion of the existing pipeline and origination of new activity will require a reduction in the current levels of uncertainty.”Despite these challenges, JPMorgan’s long-term outlook for the IB business remains strong.Opportunistic Acquisitions & JPM’s Other Expansion EffortsJPMorgan has been growing through on-bolt acquisitions, both domestic and global. In 2023, the company increased its stake in Brazil's C6 Bank to 46% from 40%, allied with Cleareye.ai (a financial technology firm focused on trade finance) and acquired Aumni. Also, the company acquired the failed First Republic Bank in 2023. The deal continues to benefit JPM’s financials and even helped it reach record profits. Additionally, in 2022, it acquired Renovite and a 49% stake in Greece-based Viva Wallet and Global Shares. These deals, along with several others, are expected to support the bank's plan to diversify revenues and expand the fee income product suite and consumer bank digitally.In February 2024, JPM announced plans to open more than 500 branches and renovate roughly 1,700 locations by 2027-end. Of the total branches to be opened, 150 were built last year. As of March 31, 2025, it had more than 4,970 branches across all 48 states in the United States. JPMorgan actively seeks to expand its digital retail bank – Chase – across the European Union countries after launching it in the U.K. in 2021. The company is focused on bolstering its IB and asset management businesses in China.JPMorgan’s Fortress Balance Sheet and Solid LiquidityAs of March 31, 2025, JPM had a total debt worth $1.01 trillion. The company's cash and due from banks and deposits with banks were $425.9 billion on the same date. The company maintains long-term issuer ratings A-/AA-/A1 ratings from Standard and Poor’s, Fitch Ratings and Moody’s Investors Service, respectively.Hence, JPM continues to reward shareholders handsomely. In March, the company announced a 12% hike in its quarterly dividend to $1.40 per share. This followed an 8.7% increase in dividends in September 2024. In the last five years, it hiked dividends five times, with an annualized growth rate of 6.77%. Currently, the company's payout ratio is 27% of earnings. Similar to JPM, its peers – Bank of America and Citigroup – have been increasing their dividend payouts regularly. Bank of America raised its dividend four times in the last five years, while Citigroup has hiked it twice.JPMorgan also authorized a new share repurchase program of $30 billion, effective July 1, 2024. As of March 31, 2025, almost $11 billion in authorization remained available.JPMorgan’s Asset Quality WeakensJPMorgan’s asset quality has been deteriorating. While the company recorded negative provisions in 2021, a substantial jump in provisions was recorded in the years after that because of the worsening macroeconomic outlook. The metric surged 169% in 2022, 45.9% in 2023 and 14.9% in 2024. Similarly, net charge-offs grew 117.6% in 2023 and 39.1% in 2024. The uptrend for both continued in the first quarter of 2025.As interest rates are less likely to come down substantially in the near term, it is expected to hurt the borrowers’ credit profile. The company remains vigilant about the effects of continuous high rates and quantitative tightening on its loan portfolio. Also, the impact of tariffs on inflation is to be seen. Hence, the company’s asset quality is likely to remain subdued.Does the Recent Slide Offer a Chance to Buy JPM Shares?So far in 2025, shares of JPMorgan have lost 1.5% compared with a 9.2% decline for the S&P 500 Index. Further,  the stock has fared better than its peers – Bank of America and Citigroup.YTD JPM Price Performance Image Source: Zacks Investment ResearchEarnings estimates for JPMorgan for 2025 have been revised upward over the past seven days. The positive estimate revision depicts bullish sentiments for the stock.JPM’s Earnings Estimates Trend Image Source: Zacks Investment ResearchNonetheless, the Zacks Consensus Estimate for JPM’s 2025 earnings implies an 8.4% fall year over year because of tariff-related headwinds and higher non-interest expenses. Management anticipates non-interest expenses to be almost $95 billion this year, up from $91.1 billion in 2024. Earnings Estimates Image Source: Zacks Investment ResearchDespite the recent sell-off in the stock, it appears slightly expensive relative to the industry. The stock is currently trading at the forward 12-month price/earnings (P/E) of 12.80X. This is above the industry’s 11.30X, reflecting a stretched valuation. Price-to-Earnings F12M Image Source: Zacks Investment ResearchAlso, JPM stock is trading at a premium compared with its peers – Bank of America and Citigroup. At present, Bank of America has the forward 12-month P/E of 9.39X, and Citigroup is trading at the forward 12-month P/E of 7.80XJPMorgan’s leading position in several businesses, strategic plan to expand its footprint globally and CEO Jamie Dimon’s leadership gives the stock an edge over its peers. Its focus on building a solid deposit franchise and bolstering its loan book positions it well for future growth. However, investors must consider the decline in JPM’s earnings this year as well as its premium valuation and be vigilant about the NII trajectory and the pace of interest rate cuts. Also, they must keep an eye on macroeconomic factors and carefully evaluate their risk tolerance before buying JPMorgan stock. Those who already own the stock can hold on to it because it is less likely to disappoint over the long term. JPM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Bank of America Corporation (BAC): Free Stock Analysis Report JPMorgan Chase & Co. (JPM): Free Stock Analysis Report Citigroup Inc. (C): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks