JPMorgan Set Report Q1 Earnings Next Week: How to Play JPM Stock?

JPMorgan JPM is scheduled to kickstart first-quarter 2025 earnings on April 11. The largest American bank’s earnings draw a lot of attention because of its presence in almost all finance sector businesses, offering insights into how the quarterly performance of other banks is likely to be.Among JPMorgan’s close peers, Citigroup C and Bank of America BAC are slated to announce quarterly numbers on April 15. Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.JPM’s fourth-quarter performance was solid, driven by impressive investment banking (IB) and trading performance. This time, we believe the company’s performance will be modest. The Zacks Consensus Estimate for fourth-quarter revenues of $43.01 billion suggests 2.6% year-over-year growth.In the past seven days, the consensus estimate for earnings for the to-be-reported quarter has been revised marginally upward to $4.60. This indicates an almost 1% decline from the prior-year quarter as rising provisions for credit losses, higher operating expenses and subdued capital markets performance are likely to have hampered JPMorgan’s bottom-line growth.Estimate Revision Trend Image Source: Zacks Investment ResearchJPMorgan has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, with the average beat being 10.96%.Earnings Surprise History Image Source: Zacks Investment ResearchFactors to Impact JPMorgan’s Q1 PerformanceNet Interest Income: In the first quarter, the Federal Reserve kept interest rates unchanged at 4.25-4.5%. This is likely to have offered some support to JPMorgan’s net interest income (NII) as the funding/deposit costs stabilized.  However, an uncertain macroeconomic backdrop because of Trump’s tariff plans is likely to have resulted in a decent lending scenario. Per the Fed’s latest data, the demand for commercial and industrial, real estate and consumer loans was modest in the first two months of the quarter.The Zacks Consensus Estimate for NII (reported) of $23.2 billion suggests a slight rise on a year-over-year basis. Our estimate for NII implies a growth of 1% to $23.31 billion.Investment Banking (IB) Fees: Global mergers and acquisitions (M&As) in the first quarter of 2025 were less impressive than previously expected. While deal value and volume rose marginally during the quarter, this was majorly led by the Asia Pacific region. The year started on an extremely positive note with the expectations of robust IB performance on the back of the Trump administration being business-friendly and the likelihood of tax cuts and deregulations. However, none of these materialized, and the rebound fizzled as ambiguity over the tariff and ensuing trade war resulted in extreme market volatility. These developments have led to economic uncertainty, with data indicating a slowdown in the U.S. economy and mounting inflationary pressure. Hence, amid such a backdrop, companies started rethinking their M&A plans despite stabilizing rates and having significant investible capital. Nonetheless, JPMorgan’s leadership in the space is likely to have supported advisory fees to some extent. As such, JPMorgan’s IB fee growth is expected to have been decent. Also, the IPO market saw signs of cautious optimism, given the market volatility and geopolitical challenges. Further, the subdued equity market performance led to weak activity in follow-up equity issuances. Bond issuance volume was weak for similar reasons. Thus, growth in JPM’s underwriting fees (accounting for almost 60% of total IB fees) is expected to have been modest during the to-be-reported quarter.At the Bank of America Financial Services Conference on Feb. 11, JPMorgan’s chief operating officer, Jennifer Piepszak, stated that IB fees in the first quarter will grow in the mid-teens range year over year. This is expected to be driven by “healthy” equity markets and debt issuances and the resurgence in IPOs. The consensus estimate for IB revenues (in the Corporate & Investment Banking segment) of $2.53 billion implies an increase of 13% from the prior-year quarter. We expect the metric to be $2.61 billion. Markets Revenues: Client activity and market volatility were solid in the first quarter. The uncertainty over the impact of tariffs on the U.S. economy and the Fed’s monetary policy drove client activity as investors shifted to safe havens. Further, volatility was high in equity markets and other asset classes, including commodities, bonds and foreign exchange. So, JPMorgan is likely to have recorded decent growth in markets revenues (comprising nearly 20% of the company’s total revenues) this time.Management expects markets revenues in the first quarter to be up in low double digits on a year-over-year basis.The Zacks Consensus Estimate for equity markets revenues is pegged at $3.01 billion, suggesting a rise of 16.5% from the prior-year quarter. The consensus estimate for fixed-income markets revenues of $5.99 billion indicates growth of 10.4%. We project equity markets revenues and fixed-income markets revenues of $3.1 billion and $5.85 billion, respectively.Mortgage Banking Fees: Despite interest rate cuts by the central bank in 2024, mortgage rates did not come down significantly. The rates hovered near 6.5% during the first quarter of 2025. As such, refinancing activities and origination volume remained decent. Thus, mortgage banking fees are likely to have witnessed some improvement at JPMorgan.The consensus estimate for mortgage fees and related income of $355.7 million implies a 29.3% jump from the prior-year quarter. Our estimate for the metric stands at $398.6 million.Expenses: JPMorgan’s plan of entering new markets by opening branches, which is already on track, along with inorganic expansion efforts, is likely to have resulted in an increase in operating expenses in the first quarter. Also, investments in technology to strengthen digital offerings might have led to higher costs.Our estimate for non-interest expenses stands at $23.8 billion, up 4.5% year over year.Asset Quality: JPMorgan is likely to have set aside a substantial amount of money for potential delinquent loans (mainly commercial loan defaults), given the expectations of higher for longer interest rates and the impact of Trump’s tariffs on inflation. Our estimate for provision for credit losses is pegged at $2.45 billion.The Zacks Consensus Estimate for non-performing loans (NPLs) of $9.32 billion implies a 21.5% increase year over year. The consensus estimate for non-performing assets (NPAs) of $9.82 billion suggests an 18.8% rise. Our estimates for NPAs and NPLs are pegged at $8.45 billion and $8.79 billion, respectively.What Our Model Unveils for JPMorganPer our proven model, the chances of JPMorgan beating estimates this time are high. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is the case here, as you can see below.JPMorgan has an Earnings ESP of +0.88%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.JPM carries a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.JPM’s Price Performance & Premium ValuationIn the first quarter, JPMorgan shares performed well. The stock outperformed the S&P 500 Index and its close peers – Bank of America and Citigroup. 1Q25 JPM Price Performance Image Source: Zacks Investment ResearchJPM shares appear expensive relative to the industry. The stock is, at present, trading at the forward 12-month price/earnings (P/E) of 12.40X. This is above the industry’s 11.66X, reflecting a stretched valuation.Price-to-Earnings F12M Image Source: Zacks Investment ResearchAlso, JPMorgan's stock is trading at a premium compared with Citigroup and Bank of America. At present, C has a forward P/E of 7.93X, while BAC’s forward P/E is 9.66X.Buy, Hold or Sell JPMorgan Stock Before Q1 Earnings?JPMorgan is well-placed to benefit from its scale and size, and leverage its leading position in several businesses. The acquisition of First Republic Bank in 2023 continues to support its financials. The company is expanding its footprint in new regions and plans to capitalize on cross-selling opportunities. While such expansion plans will lead to higher investment-related expenses, they bode well for the company’s long-term prospects and will provide it an edge over its peers.Yet, the volatile nature of the capital markets business will likely keep JPM’s fee income growth challenging. The stock’s premium valuation weighs on it. Therefore, investors must check management comments regarding this year’s NII and the IB business prospects during the first-quarter 2025 conference call before making any investment decision. Also, they should keep an eye on macroeconomic factors and policy matters that are likely to influence the company’s future performance. Those who already own JPM stock can hold on to it because it is less likely to disappoint over the long term. However, those who intend to buy the stock should consider the above-mentioned factors carefully and evaluate their risk tolerance before investing.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>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. 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