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Earnings reports season gets off to a slow start next week before a number of banks and financial companies report their latest quarterly results on Friday, Jan. 14. The bank earnings will be closely watched, especially given that bank stocks, as a group, have gotten off to a strong start early in the new year, buoyed by expectations that the U.S. Federal Reserve will begin raising interest rates as soon as March of this year.
Banks tend to perform strongly in a high interest rate environment as they make the majority of their profits from interest charged on loans. The iShares US Financials ETF (NYSEARCA:IYF) has risen 4% during the first trading week of 2022. A strong showing from the largest U.S. banks could propel financial stocks even higher and help to calm a jittery market that has seen a big selloff in more speculative technology stocks and cryptocurrencies in recent days.
Here are four financial stocks releasing earnings reports next week:
Earnings Reports: JPMorgan Chase (JPM)
Earnings season kicks off with the latest earnings from the largest American bank, JPMorgan Chase. The New York-based lender currently has total assets of nearly $4 trillion and remains the biggest bank in the world by market capitalization ($490.7 billion). A strong quarterly showing will help take the spotlight off of a recent scandal at JPMorgan Chase. In December, the bank was fined $200 million by regulators for several “bookkeeping failures” and for letting employees use personal communications devices to send texts and emails about sensitive company business and evade authorities.
For its latest quarter, analysts expect JPMorgan Chase to report revenues of $29.8 billion and earnings per share (EPS) of $2.98. Any beat to the upside should help to push JPM stock even higher. The bank’s shares have been a good bet throughout the global pandemic, having risen around 24% over the past year to their current level of $165.64.
Analysts see more upside ahead, with a median price target on the stock of $184, which would be 11% higher than their current level. The ability to charge higher interest rates over the coming year should only help JPMorgan’s earnings in future quarters. Among bank stocks, JPMorgan Chase is a top pick.
Wells Fargo & Co. (WFC)
San Francisco-based Wells Fargo has been the top-performing stock among national U.S. lenders over the past year, having gained over 60% to now trade at $54.67. With a major scandal involving fake accounts behind it and a new management team in place, Wells Fargo has regained the trust of investors and WFC stock has been on a tear, having risen around 11% in the past month alone. A better-than-expected earnings print could add more steam to Wells Fargo shares and keep the stock chugging higher. Wall Street is expecting the lender to report revenues of $18.69 billion and EPS of $1.09 when it announces results next Friday.
Several analysts remain extremely bullish on WFC stock’s prospects this year. Barclays (NYSE:BCS) recently upgraded its rating on Wells Fargo stock to “overweight,” saying that the bank should outperform the financial sector in 2022 due to positive exposure to higher interest rates and as regulators continue to move away from its scandal.
Some analysts and investors also praise Wells Fargo’s ongoing expense management initiative, which has seen the lender reduce its overall expenses by “streamlining organizational structure, closing branches and reducing headcount by optimizing operations and other back-office teams.” All of these initiatives should help its long-term financial health.
Earnings Reports: BlackRock (BLK)
BlackRock is not a bank. Rather, it is the largest investment management company in the world with assets under management of $9.5 trillion as of October 2021. Today, BlackRock has clients in 100 countries around the world and continues to be led by founder and Wall Street veteran Larry Fink. In the past 12 months, BlackRock stock has climbed about 21% higher to its current price of $889.48 a share. While a strong performance, Wall Street sees the stock gaining more ground this year. The median price target on BLK stock is currently $1,036, implying a 16% upside from current levels.
Analysts forecast that BlackRock will report quarterly revenues of $5.13 billion and EPS of $10.04. BlackRock recently made headlines after it announced that it is pulling $2 trillion of assets that had been managed by State Street (NYSE:STT), a move that BlackRock says will reduce its reliance on a single outside investment manager and help to lower its costs for back-office workers. BlackRock said it plans to move the administrative and accounting tasks that State Street had performed to other lenders, such as Citigroup and Bank of New York Mellon Corp. (NYSE:BK).
Citigroup (C)
Shares of Citigroup have been lagging behind other bank stocks over the last year. Since January 2021, C stock has been essentially flat (down 1.69%) at $66.21 a share. The main reason for the underperformance vis-à-vis its peers is the transformation that Citigroup is currently undergoing, some of which has not gone smoothly. Under the leadership of Chief Executive Officer Jane Fraser (the first women to run a major U.S. bank), Citigroup is in the process of exiting its consumer banking business in 13 markets around the world, a process that is expected to provide the bank with $7 billion in cash.
However, exits from Australia and South Korea have gone pear shaped and wound up costing Citigroup nearly $1.7 billion. Investors have not been impressed by the costs associated with the transformation so far. They also haven’t liked that Citigroup’s Board of Directors approved incentives that could see three executives in the organization earn up to $5 million in compensation based on the transformation’s success.
Still, despite the problems, analysts expect C stock to eventually rise substantially. The median price target on the shares is $76, which would be around 15% higher than where the stock currently sits. Next week, Wall Street expects Citigroup to announce revenues of $16.98 billion and EPS of $1.71 when it releases its earnings reports.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.