SYS-CON MEDIA Authors: Kevin Benedict, Jason Bloomberg, David H Deans, RealWire News Distribution, Gilad Parann-Nissany

News Feed Item

Zacks Earnings Trends Highlights: J.P. Morgan, Bank of America and Citigroup

CHICAGO, April 17, 2014 /PRNewswire/ -- Zacks Director of Research Sheraz Mian says, "The market has likely moved past the Q1 numbers and is looking ahead to the coming periods when earnings growth is expected to accelerate."

Zacks Investment Research, Inc., www.zacks.com

Q1 Earnings Season Off to a Weak Start

The 2014 Q1 earnings season has gotten off to a relatively soft start. Low expectations essentially guarantee that we are unlikely to get any major negative surprises. But as with economic data, the market has likely moved past the Q1 numbers and is looking ahead to the coming periods when earnings growth is expected to accelerate.

A big part of the reports thus far have been from the Finance sector, with results from more than one-third the sector's total market capitalization are already out. Most of the Finance sector results have been from the major banks, which alone account for more than 40% of the Finance sector's total earnings.

Estimates for bank earnings had fallen ahead of the start of the earnings season as it became clear that weakness in the capital markets business will compound the existing mortgage banking woes. The capital markets business, particularly on the fixed income side has been weak for a while and we will likely see a continuation of that trend in Q1, with fixed income revenues offsetting gains on the advisory sides. We saw this with J.P. Morgan (NYSE:JPM-Free Report), Bank of America (NYSE:BAC-Free Report) and even Citigroup's (NYSE:C-Free Report) otherwise better-looking report couldn't hide this issue. The ever present legal/compliance costs also don't seem to be going away either and have effectively become a recurring part of the business model.

The weak results at Bank of America are a big reason for the Q1 earnings decline for the Major Banks industry. But even excluding the company, the industry's Q1 results are weaker than what we have been seeing in recent quarters. Even the beat ratios, both earnings as well as revenues, are weaker than in other recent quarters.

Overall Q1 expectations remain low, with total earnings for the S&P 500 expected to be down -4.0% from the same period last year on +1.3% higher revenues and modestly lower margins. As has been the trend for more than a year now, estimates for Q1 came down sharply as the quarter unfolded. The current -4.0% decline in total Q1 earnings is down from +2.1% growth expected at the start of the quarter in January.

With two-thirds of S&P 500 members typically beating earnings estimates in any reporting cycle, actual Q1 results will almost certainly be better than these pre-season expectations. But Q1 is unlikely to repeat the performance of the last few quarters when we would witness new all-time records for total earnings each quarter.

Guidance has been overwhelmingly weak for more than a year now, keeping the revisions trend firmly in the negative direction. Odds are that we wouldn't see any change on that front this earnings season either, bringing down estimates for the rest of the year. Investors haven't cared about negative estimate revisions thus far, but it will be interesting that behavior will remain in place going forward as well.

Want stock picks from Zacks Equity Research that are based on earnings estimates? Subscribe to the free "Profit from the Pros" newsletter: Click here

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term. Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Click here to subscribe to this free newsletter today.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros.  In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.

Get the full Report on JPM - FREE

Get the full Report on BAC - FREE

Get the full Report on C - FREE

http://www.zacks.com/registration/pfp/?ALERT=ZR_LINK&adid=PR_ET&d_alert=rd_final_rank&t=TRV Follow us on Twitter:  http://twitter.com/zacksresearch

Join us on Facebook:  http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

[email protected]

http://www.zacks.com

Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Logo - http://photos.prnewswire.com/prnh/20101027/ZIRLOGO

SOURCE Zacks Investment Research, Inc.

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.