Banking, finance, and taxes

Earnings Previews: BlackRock, Citigroup, JPMorgan, Wells Fargo

Paul Ausick

Published: January 12, 2022 12:04 pm

The December-quarter earnings season goes into second gear Friday morning. Four of the country’s biggest banks are reporting results, and expectations overall are for results to be outstanding. Even better, higher interest rates could lead to even stronger results for the rest of this year.

So far this week, we have seen only a handful of noteworthy earnings reports, and the results have been mixed. We already have previewed three companies reporting this week: after markets close Wednesday, homebuilder KB Home reports fourth-quarter results, and before markets open Thursday we will hear from Delta Air Lines and Taiwan Semiconductor.
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Here is a look at Friday morning’s top earnings reports.

BlackRock

The world’s largest investment management firm, BlackRock Inc. (NYSE: BLK) had nearly $9.5 trillion in assets under management at the end of the September quarter. Over the past 12 months, shares have added about 20%, including a drop of 13% in early October and an increase of more than 9% since. The company’s exchange-traded products recorded $3.1 trillion of inflows in 2021,1.7 times the record-setting inflows of 2020 and roughly equal to total inflows for the past two years combined.

Analysts remain bullish on the firm, with 11 of 14 giving the shares Buy or Strong Buy ratings and the rest rating the stock at Hold. At the recent share price of around $896.50, the upside potential on the shares based on a median price target of $1,035 is 15.4%. At the high price target of $1,141, the upside potential is 27.3%.

Fourth-quarter 2021 revenue is forecast at $5.12 billion, which would be up about 1.4% sequentially and more than 14% higher year over year. Adjusted earnings per share (EPS) are forecast at $10.07, down 8% sequentially and 1% lower year over year. For the full year, analysts are currently forecasting EPS of $38.78, up 14.7%, on sales of $19.4 billion, up 20%.

BlackRock stock trades at 23.1 times expected 2021 EPS, 21.1 times estimated 2022 earnings of $42.49 and 18.9 times estimated 2023 earnings of $47.34. The stock’s 52-week range is $670.28 to $973.16. BlackRock pays an annual dividend of $16.52 (yield of 1.86%). Total return to shareholders for the past 12 months is 17.6%.

The fifth-largest U.S. bank (by market cap), Citigroup Inc. (NYSE: C) has seen about 4.7% added to its share price over the past 12 months. That gain reflects a share price decline of more than 14% since early June. The combination of declining revenue in the bank’s Global Consumer Banking business, a low-interest-rate environment and the bank’s own strategy shift have weighed on the stock. Investors will be most interested to hear what the bank expects 2022 to look like, as 2021 is already in the books.
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Analysts remain bullish on the stock, with 17 of 25 putting a Buy or Strong Buy rating on the shares and the other eight rating the stock at Hold. At a share price of around $67.50, the upside potential based on a median price target of $78 is 15.5%. At the high price target of $120, the upside potential is 77.7%.

Fourth-quarter revenue is forecast at $16.76 billion, down about 2.3% sequentially but up about 1.6% year over year. Adjusted EPS are forecast at $1.66, down 23% sequentially and about 20% year over year. For the full 2021 fiscal year, analysts currently forecast EPS of $10.36, up 112%, on revenue of $70.72 billion, down almost 5%.

The stock trades at 6.5 times expected 2021 EPS, 8.6 times estimated 2022 earnings of 7.82 and 8.0 times estimated 2023 earnings of 8.46. The stock’s 52-week range is $57.40 to $80.29, and Citi pays an annual dividend of $2.04 (yield of 3.09%). Its total return to shareholders for the past year is about 4%.

JPMorgan

The largest (by market cap) of the big U.S. banks, JPMorgan Chase & Co. (NYSE: JPM) has seen a share price increase of about 25% over the past 12 months. The bank’s operating leverage, the ratio between the 12-month change in expenses and revenues, is likely to be negative again as it was in the previous quarter.

Of 26 analysts covering the stock, 15 have a Buy or Strong Buy rating on the shares while another nine rate the stock at Hold. At a share trading price of around $168.40, the upside potential based on the median price target of $184 is 9.3%. At the high price target of $210, the upside potential is 24.7%.
Analysts are expecting JPMorgan to report fourth-quarter revenue of $29.71 billion, up by less than 1% sequentially and 1.9% higher year over year. Adjusted EPS are forecast at $3.05, down 14.2% sequentially and down two cents year over year. For the full year, current estimates call for EPS of $14.97, up 76.6%, on revenue of $122.73 billion, or 2.7% higher.

JPMorgan stock trades at 11.2 times expected 2021 EPS, 14.0 times estimated 2022 earnings of $11.99 and 12.8 times estimated 2023 earnings of $13.14. The stock’s 52-week range is $127.35 to $1772.96. JPMorgan pays an annual dividend of $4.00 (yield of 2.39%). Total shareholder return for the past 12 months is 22.8%.
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Wells Fargo

Wells Fargo & Co. (NYSE: WFC) is the nation’s third-largest bank (by market cap) and its share price has risen by about 72% over the past 12 months. The stock traded up by more than 17% in just the first two weeks of 2022. Investors are betting that the Federal Reserve will lift the $1.95 trillion asset cap imposed on the bank in 2018. That, coupled with expected interest rate increases, could deliver Wells Fargo from its three-year stay in purgatory and get it back to building its balance sheet.

Analysts are getting more bullish about Wells Fargo. Of 27 brokerages covering the bank, 11 have a Hold rating but 16 have a Buy or Strong Buy rating on the shares. At a share price of around $56.25, the upside potential based on a median price target of $57 is just 1.3%. At the high price target of $70, the upside potential is about 24.4%.

Analysts are expecting fourth-quarter revenue to total $18.62 billion, down about 1.1% sequentially but up about 3.8% year over year. Adjusted EPS are forecast at $0.99, down about 18.5% sequentially and up more than 41% year over year. For the full 2021 fiscal year, EPS are forecast to rise by more than 300% to $4.32 and revenue is expected to rise by 4.9% to $75.89 billion.

Wells Fargo stock trades at 13.0 times expected 2021 EPS, 15.1 times estimated 2022 earnings of $3.72 and 12.6 times estimated 2023 earnings of $4.48. The stock’s 52-week range is $29.68 to $56.71, and the high was posted Wednesday morning. Wells Fargo pays an annual dividend of $0.80 (yield of 1.457%), and total shareholder return for the past 12 months is about 68%.