JPMorgan JPM, the biggest U.S. bank in terms of total assets, is well positioned to grow, driven by consistent rise in loan demand, branch expansion efforts and solid asset quality despite lower interest rates. Further, the acquisition of InstaMed and focus on strengthening credit card business will aid its financials.
This Zacks Rank #2 (Buy) stock seems like an attractive investment opportunity right now as it has been witnessing solid upward estimate revisions, and promising price performance amid volatile markets.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Over the past seven days, the Zacks Consensus Estimate for earnings has moved marginally upward for both 2019 and 2020. Additionally, shares of JPMorgan have rallied 41% so far this year, outperforming the industry’s increase of 34.6%.
Here’s Why JPMorgan is a Solid Pick
Earnings growth: Over the past three to five years, JPMorgan witnessed earnings growth of 15.3%. Further, the company’s earnings are projected to grow 15.6% and nearly 1% in 2019 and 2020, respectively.
Moreover, JPMorgan has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 4.4%.
The company’s long-term (three-five years) estimated earnings growth rate of 7% promises rewards for investors in the long run.
Revenue strength: JPMorgan continues to benefit from decent loan growth and improving economy. Further, the company is on track to open roughly 400 new branches in 15-20 new markets by the end of 2022, which will provide additional support. Also, in July, the company acquired InstaMed, which will enable it to expand reach into lucrative U.S. healthcare payments market.
Despite the challenging market environment, JPMorgan’s total deposits and loan balances have been growing over the past several quarters. All these are expected to further support growth in revenues. The company’s sales growth is projected to be 5.1% for 2019, above the industry average of 1.3%.
Encouraging capital deployment plan: The Federal Reserve has approved 2019 capital plans of JPMorgan and other major banks like Bank of America BAC, Citigroup C and Wells Fargo WFC. Following this, JPMorgan raised its quarterly dividend 12.5% to 90 cents per share in September. Also, the company has a share repurchase program of up to $29.4 billion in place.
These activities reflect its capital strength and commitment toward rewarding shareholders. Given the solid liquidity position and earnings strength, the company should be able to sustain higher capital deployments.
Superior Return on Equity (ROE): JPMorgan’s ROE ratio is 14.63% compared with the industry average of 12.25%. This indicates that the company reinvests more efficiently compared to the industry.
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