First Earning Take-off 2023!

This upcoming earnings season will be mainly focused on the profit margins of corporations, as investors look forward to the company forecasts for 2023 in order to gauge the health of the economy.

 

In this article:- 

  1. Bank of America
  2. JPMorgan Chase & Co 

  3. Wells Fargo

  4. Citigroup Inc

  5. Blackrock Inc

It is essential to understand that the next bull market, whenever it begins, will depend heavily on those margins staying well above average or even expanding further so that the next bull market can even outperform the current one.

 

In spite of this, experts believe the company earnings season will be overshadowed by the economic climate as a whole, with interest rates and inflation figures being more closely followed than the earnings reports of individual companies.

 

Several companies anticipate that weather will affect earnings in the final quarter of 2022, including Cenovus Energy Inc., which expects its refinery throughput to suffer as a result of extreme winter weather, operational issues, and third-party pipeline outages. Meanwhile, profits at most major oil companies soared in the third quarter of 2022, continuing a trend of massive profits despite the Russian invasion of Ukraine that has caused consumer prices to soar. Early Q4, 2022 Exxon Mobil reported its highest earnings ever at $19.7B for the quarter, while Shell reported its second highest of $9.5B.

Stocks are soaring in the new year of 2023.

It may have been a good start to the year for stocks. However, always take into consideration that the trend might dim out with corporate earnings season kicking off last Friday. Throughout the market, laying-offs have been announced consistently, signaling poor conditions.

 

Right now, the bigger economic picture of inflation and interest rates is much more important to investors than individual earnings reports, said  Michael Currie, senior investment adviser at TD Wealth.

 

In contrast, the market may be pleasantly surprised by the larger earnings picture.

 

S&P 500 companies are scheduled to report earnings starting last week, but the primary focus of the first round will be on the financials and the banks in particular.

1. Bank of America reported better-than-expected fourth-quarter earnings on Friday morning.

 

 

With its fourth-quarter results released on Friday, Bank of America (BAC NYSE) showed higher interest rates helped it make up for a sharp slowdown in investment banking. Revenue also surpassed Wall Street expectations.



Earnings: $0.85/share

Revenue: $24.66B

 

In the fourth quarter, higher interest rates and loan growth led to significant gains in interest income. Despite a 29% year-over-year increase in net interest income, the bank reported $14.7 billion of this quarter’s income, slightly below Wall Street’s expectation of $14.8 billion.

 

The Bank reported its full-year 2022 net income of $27.5 B with earnings of $3.19/share. 

 

 

The bank share rose up to 2.2% with its previous close of $34.47 and rise to $35.23 after the announcement.

2. JPMorgan Chase & Co top Q4 earnings with EPS $0.46

JPMorgan’s (JPM:NYSE) report showed higher than the analyst estimation of Q4 with revenue for the quarter coming in 9% higher at $34.5B compared to the consensus estimate of $34.17B. With Earning per share of $0.46 higher than estimated. 



Earning: $3.57/share

Q4 net income: $11B

 

The Bank reported its full-year 2022 net income of $37.7 B with earnings of $12.09/share. 

 

Jamie Dimon, JPM CEO highlighted most of JPM’s business lines performing well throughout the quarter and will continue seeing momentum. “In 2022, we extended credit and raised $2.4T in capital for small and large businesses, governments, and U.S. consumers”. Considering the extended capital, it can be envisioned as a 2023 business initiative.

 

 

Following suit, JPM share rose up to 3.86% with its previous close of $139.49 and rise to $143.01 after the announcement. 

 

3. Wells Fargo’s disappointing earnings ahead of major layoffs

 

 

In contrast to the previous two, Wells Fargo (WFC:NYSE) reported a halving 50% of its profit with $2.86 B, or $0.67/share, from $5.75B, or $1.38/share, a year ago.

 

According to the bank, it set aside $957 million to cover its credit losses during the most recent period, after reducing its provisions by $452 million a year ago. A $397 million increase in the allowance for credit losses related to loan growth and a less favorable economic environment was included in the provision. 

 

Earnings: $0.67/share, compared with $1.38 a share a year ago

Revenue: $19.66B –  lower than the $19.98 B lower than estimation. 

 

“Though the quarter was significantly impacted by previously disclosed operating losses, our underlying performance reflected the progress we are making to improve returns,” CEO Charlie Scharf .

 

 

 

 

 

 

The stock erased earlier losses to trade 2% higher in Friday’s trading and later rise from $40.55 and closed at $44.22, a total of 9.05% increase. 

 

Shares of Wells fell nearly 22% in 2022, faring better than the S&P 500 as the bank’s retail and commercial banking benefited from rising rates. The stock is up about 5.8% year to date (January 3, 2023 onwards). 

 

“As we look forward, we are carefully watching the impact of higher rates on our customers and expect to see deposit balances and credit quality continue to return toward pre-pandemic levels,” – said CharlieScharf.

4. Citigroup Inc missed earning by 3.52% per share

 

 

Citigroup Inc. (C:NYSE)  reported net income of $2.5B, or $1.16/diluted share, on revenues of $18.0B for Q4 2022. This fall from the performance of the same quarter of Q4,2021 with net income of $3.2B, or $1.46/ diluted share, on revenues of $17B.

 

Citigroup reported its full-year 2022 revenue of $75.3B, a total net income of $14.8 B with earnings of $7/share. 

 

“One of our major goals in 2022 was to put in place a strategic plan designed to create long-term value for our shareholders and I am pleased with the significant progress we have already made in terms of our Transformation, simplification and strengthening our five interconnected businesses, some of which delivered excellent results this quarter” – Jane Fraser, Citi CEO 

 

 

 

 

The stock previously close at $49.09 on Thursday and rose 1.69% January 13, Friday’s trading day following the release. The stock hit $40.45 last October 11 2022 few days before this Q3 earning announcement and had been circulating with $48-$50 since last November 2022. 

 

“We intentionally designed a strategy that can deliver for our shareholders in different environments, and we are very much on track to reach the medium-term return targets we shared on Investor Day,” – Jane Fraser.

5. Blackrock, beat market in this quarter too.

 

Media: Getty Image

 

Blackrock (BLK:NYSE) EPS beat estimation by 10.61%. As a matter of fact, Blackrock has only missed expectations once during Q2, 2022 while maintaining its performance across the other three quarters.

 

Full Year 2022 EPS  (diluted) of $33.97($35.36 – adjusted)

Q4 2022 EPS (diluted) :  $8.29 ($8.93 – adjusted)

 

In contrast, Blackrock’s revenue for the fourth quarter of 2022 reported was $4.34 billion, a decrease of -15.06% compared to the same quarter last year.



“BlackRock’s diversified investment and technology capabilities provide clients with more choice to address their unique risk preferences and priorities”. – Laurence D. Fink, Chairman and CEO.

 

In a statement, Larry Fink admitted that negative market conditions last year had a significant impact on the world’s largest fund manager, wiping out $1.4tn of assets and reducing profits. Further, the company announced earlier this week it was cutting 500 jobs in total, about 2.5% of its workforce, following the layoffs in the tech and financial sectors. 

 

 

Despite beating analyst estimation, the stock fell 0.5% after posting its Q4 profitas a global market rout pressured fee income and assets under management fell.


Nevertheless, Laurence D. Fink, Chairman and CEO. ensured Blackrock projection of 2023 to remains to its roots of investing in the long run.  “Like our clients – pensions, insurers, governments, and individual savers – BlackRock’s focus remains on investing for the long term. The current environment offers incredible opportunities for long-term investors, and we enter 2023 well-positioned and confident in our ability to deliver for our clients, employees, and shareholders.”

Extra:

Another Grim Reaper – Goldman Sachs layoffs

 

Goldman Sachs who will presented their earning on January 17, 2023 also conducted its worst layoffs in over a decade this week. About 6.5% of its total workforce, or roughly 3,200 employees, are out. The teams hit the worst were consumer lending and consumer banking.

Bottom Line

Although inflation and geopolitical jitters continue to affect the big U.S. banks, many organization still manage to achieve earnings targets despite the pressure. 

 

There are glimmers of hope after this quarter. The second half of the year could be a positive time for stocks if the Fed begins to ease up on the interest-rate increases, which would result in falling bond yields.

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