Top Financial Earnings on Deck (JPM, GS, C, BAC, PRSP, FAS, FAZ)

This week is the week we have 6 DJIA components reporting earnings as the first real week of earnings season, but the big financial stocks reporting will set the tone for how the rest of the financial sector’s earnings are going to be received.  In banking we have the cleanest bank in JPMorgan Chase & Co. (NYSE: JPM) reporting and the cleanest brokerage firm, ergo bank holding company with no bank, in Goldman Sachs Group Inc. (NYSE: GS).  We also have Citigroup Inc. (NYSE: C) on Thursday and Bank of America Corporation (NYSE: BAC).  While Prosperity Bancshares Inc. (NASDAQ: PRSP) is far from any national leadership bank, it is deemed by the investment community as one of the cleanest regional banks out there and its earnings are due Friday morning.

These earnings also going to have a direct impact each day in the trading of the highly volatile Direxion Daily Financial Bull 3X Shares (NYSE: FAS) and Direxion Daily Financial Bear 3X Shares (NYSE: FAZ).  Be advised that Direxion has been making its own disclosures that these triple-leverage ETFs target effective moves during the trading session rather than how they trade through time and from closing bell to opening bell the next day.  Our take is that you could easily see double-digit percentage moves in these two ETFs on Wednesday, Thursday, or Friday because of the sector volatility.

We have compiled details based on Thomson Reuters consensus estimates and provided some more detailed coverage on what to look for and how these stocks have performed since the March 9 close (regarded as the lowest market closing bottom) and since the June 30 close to see how these have done over the last quarter.

JPMorgan Chase & Co. (NYSE: JPM) reports earnings on Wednesday morning and is effectively the first of the banking giants on deck.  It is also deemed the cleanest of all the money-center banks.  Estimates are $0.49 EPS and $24.81 billion.  Since the end of June this is up almost 33% and since the March 9 close this is up 186%.  With JPMorgan being the cleanest bank and the only major financial stock reporting earnings, this one could easily set the bar for how banks and financial have to report earnings.

Citigroup Inc. (NYSE: C) is up for earnings on Thursday morning.  We just noticed how traders are using a certain call option as a lotto ticket investment strategy.  Estimates were -$0.21 EPS as of Friday, but the consensus is now -$0.23 EPS.  We noted over the weekend how this was up 55% since June 30 and up over 300% since the March 9 close.  Deutsche Bank just gave it a BUY rating today ahead of earnings.  Citi is also still under the TARP.

Goldman Sachs Group Inc. (NYSE: GS) is also on deck for earnings this Thursday morning, and the tone has been set for a negative reception now that Meredith Whitney downgraded it before the report.  Consensus estimates are about $4.24 EPS on $11.02 billion in revenues.  What everyone is used to at Goldman is a significant win over earnings estimates as the last report was almost 40% better than estimates and the March report effectively doubled the estimates.  In short, whisper numbers may be demanding closer to $5.00 EPS from the Golden Slacks boys.  Shares are up 26% from the June 30 close and are up over 150% from the March 9 close.  Either way, Warren Buffett’s Berkshire Hathaway, Inc. (NYSE: BRK-A) is up huge on its investment in Goldman Sachs.

Bank of America Corporation (NYSE: BAC) is reporting on Friday morning.  The departure of Ken Lewis has not taken the wind out from the shares very much but does pose a wild card for how the quarter will go.  Estimates are currently -$0.06 EPS on about $27.7 billion in revenues.  As noted over the weekend, this one is up 32% since the end of June and since the March 9 close this is up over 300%.  B of A is still under the TARP.

Prosperity Bancshares Inc. (NASDAQ: PRSP) is far from a major bank on the national or super-regional scale, but it is growing to be a more and more important bank throughout Texas.  We would caution that there is a smaller pool of analysts than in the major bank stocks.  That being said, the estimates are for Prosperity to come in at $0.61 EPS on $91.8 million in revenues. This bank is ‘only’ up 15% since the June 30 close but is up 51% since the March 9 close.

As a reminder, some of these estimates are likely to change before the earnings based upon each prior report.  Ditto for any whisper-number expectations.  You can join our open email distribution list to get updates each morning on analyst upgrades and downgrades, top day trader alerts, IPO’s and secondary offerings, Warren Buffett and other guru activity, M&A and more.

JON C. OGG
OCTOBER 13, 2009