Investors’ Eyes Turn To Earnings

There are a lot of factors impacting stocks, but earnings season is about to throw another wildcard into the mix. Let’s see how banks fared today as they bring us into another season of earnings. 🔔

First up is JPMorgan Chase, which reported earnings per share (EPS) of $4.33 on revenues of $40.69 billion. That topped estimates of $3.96 in EPS on $39.63 billion in revenues.

Net interest income surged 30% YoY to $22.9 billion, topping estimates by $600 million. Its provision for credit losses came in at $1.38 billion, way below the $2.39 billion Wall Street estimate. 🔺

With that said, CEO Jamie Dimon warned analysts that those figures will normalize over time. Retail banking profits jumped 36% YoY, but corporate and investment banking fell 12% on tepid deal flow.

Dimon remains cautious overall, saying current economic conditions could cause interest rates to climb even further. He also referenced the potential implications of last week’s attacks on Israel, stating, “This may be the most dangerous time the world has seen in decades. While we hope for the best, we prepare the firm for a broad range of outcomes.” ⚠️

Meanwhile, Citigroup reported adjusted EPS of $1.63 vs. the $1.21 expected. Revenues of $20.14 billion topped the $19.31 billion anticipated. 

Driving the strength was a 12% YoY increase in institutional clients revenue, with rates and currencies revenues the best it’s seen in a decade. Personal banking and wealth management were up 10% YoY, with Citigroup’s overall revenue growth coming in at 9%. 💰

Like JPMorgan, its total cost of credit came in lower than anticipated, primarily due to a smaller-than-expected increase in allowances for credit losses. Overall, the bank and its new CEO are focused on the restructuring plan that will divide it into five main business lines by early 2024. 🏦

And Wells Fargo also managed to top earnings and revenue expectations. Higher net interest income drove the results, but higher rates are also having an impact on credit quality.

CEO Charlie Scharf said, “While the economy has continued to be resilient, we are seeing the impact of the slowing economy with loan balances declining and charge-offs continuing to deteriorate modestly.”

Collectively, the banks warned of a slow but gradual decline in the U.S. consumers’ health and economic outlook. Although the industry is benefitting from higher rates more broadly, it understands the impact that higher costs of capital have on consumers and the overall economy. As a result, they’re erring more on the side of caution as several risks emerge into year-end. 🛍️

After an initial pop, the stocks all pulled back intraday to close well off their highs. For the last year, JPMorgan has been the clear winner in an industry that remains well off its 2022 highs. 📊

The Japanese conglomerate is best known for its printers and cameras but hopes a business pivot will help get its stock price going again. 💡

Today, the company launched a tool that helps manufacture the most advanced semiconductors. Its “nanoimprint lithography” (NIL) system is the company’s attempt to compete with Dutch firm ASML, which leads the extreme ultraviolet (EUV) lithography machine industry. 

This technology is in high demand because it plays a significant role in manufacturing semiconductors at 5 nanometers and below. Essentially, there’s a race to make semiconductors smaller and more powerful. And whoever can develop the tools needed to do that should benefit strongly from this secular growth trend. 🏭

Canon says its latest machine is able to make semiconductors equivalent to a 5nm process and go as small as 2nm. For context, Apple’s most recent iPhone models use a 3nm semiconductor. With TSMC and Samsung looking to make 2nm chips in 2025, Canon will likely attempt to siphon off some market share from ASML as overall industry demand surges. 

While the company has been developing its NIL technology since 2004, it’s failed to gain meaningful traction in the world of increasingly complex semiconductors. 📊

However, it hopes the world’s renewed focus on the industry and rising geopolitical tensions between the West and China will help it secure a leadership spot in this space. It’s still unclear, though, if the company can ship this technology to China or if it will fall under current sanctions.

$CAJ shares were flat on the day as investors assessed whether this is all hype or a meaningful shift in the company’s business prospects. 🤔

Insurance company Progressive jumped to all-time highs after reporting third-quarter results. 📈

Its adjusted earnings per share of $1.89 topped estimates of $1.72, while net premiums written and earned both rose 20%. Analysts had anticipated net premiums written of $15.38 billion vs. actual results of $15.59 billion. 🔺

The insurance industry has been facing significant cost pressures over the last few years but has compensated for that by raising customers’ premiums. Progressive’s diversified mix of policies and coverage areas has allowed it to hold up better than some of the more concentrated insurers.

$PGR shares continued their upward trend on the news. 🤩