November 12, 2008 Ticker: JPM About JPMorgan Chase's principal bank subsidiaries are JPMorgan Chase Bank, National Association (JPMorgan Chase Bank, N.A.), a national banking association with branches in 17 states, and Chase Bank USA, National Association (Chase Bank USA, N.A.), a national bank that is the Company's credit card issuing bank. JPMorgan Chase's principal non-banking subsidiary is J.P. Morgan Securities Inc., its United States investment banking firm. The bank and non-bank subsidiaries of JPMorgan Chase operate nationally, as well as through overseas branches and subsidiaries, representative offices and subsidiary foreign banks. The Company's activities are organized into the following business segments: We all heard about the last major acquisition - in September 2008, JPM acquired all deposits, assets and certain liabilities of Washington Mutual's (WM) banking operations from the FDIC (Source: Reuters). Earnings Given the current state of economy, it is probably a little harsh to go strictly by the earnings figures – more so for the financial sector (well most of it anyway). And the earnings are not what make me interested in this stock. That said, I think I would still not be too out of line in presenting the earnings here (a smaller font maybeJ). JPM reported 4th quarter 2005 earnings of USD .73 per share on 1/18/06.This beat the consensus of USD 0.72 by USD 0.01 and this has been a trend for JPM since then (with the exception of Q4 2007 when it missed the analyst estimates by $0.06). Here are the recent earning numbers Earnings Actual Analyst Estimates Difference Q3 2008 (10/15/2008) $0.11 -$0.21 $0.32 Q2 2008 (7/17/2008) $0.54 $0.44 $0.10 Q1 2008 (4/16/2008) $0.68 $0.64 $0.04 So even in this economy JPM has managed to beat analyst estimates (OK agreed that they are in some ways easy to "report"). The estimate for Q4 2008 is at $0.54 (Range $0.37 to $0.90) – I wouldn't be surprised if they miss it this time. Cash Flow Nothing to write home about, but still in the positive territory. The balance sheet also seems OK as of Q3 2008 – nothing out of ordinary but that is to be expected. The whole financial sector is "priced right" right now (many folks would say "undervalued" – let's just say I am not one of them) and potentially has a huge up-side. I do not think the financial sector as a whole can fail or will be allowed to. And once things start getting better, financial sector would be one of the first ones to translate the positivity into share prices. Until that happens – the prices will stay in the "right" zone. Now, as with anything else – timing is of essence here – so do your research and get it at the right price – I will not speculate the absolute bottom before it starts picking up (that would be a traders job – and there are many other stocks out there better than this one for traders). So why JPM and not Bank Of America (BAC) or Citigroup (C)? Your answer lies in one look at the cash flow (and to a lesser extent, but also on the margins). So when the dawn breaks it will be the biggest, strongest institutions that would be expected to still be there and come out stronger, leaner (read fewer toxic assets) and meaner from the experience. Certainly a stock on my radar! But the timing is very important for this one. Not comfortable with JPM, but think the financial sector will mainly have an upside – try Financial Select Sector SPDR – XLF.
JPMorgan Chase (JPM)
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