Investing

Earnings Previews: Goldman Sachs, JPMorgan, PepsiCo

The June quarter earnings season kicks off Tuesday with quarterly reports from two of the country’s largest banks and one of its largest beverage and snack food companies. The rest of the other big banks will be issuing earnings reports this week as well, and we’ll be returning to daily previews.

The second-quarter story for the big banks is expected to show higher quarterly profits, even though trading income is likely to slow and low interest rates continue to diminish bank revenues. Sequentially, profits and revenues are expected to be lower than the estimate-busting results of the first quarter.

Year over year, however, should be a different story. First- and second-quarter profits in 2020 were awful, and first-quarter 2021 results blew past the year-ago results. The same thing is expected, but probably to a lesser degree in the second quarter.

It is highly likely that the big banks will continue to release reserves and that will brighten a lot of earnings reports. Investors are going to be looking for buybacks, at least, plus a good story about how the second half of 2021 shapes up.

Goldman Sachs

Goldman Sachs Group Inc. (NYSE: GS) has posted a 12-month share price gain of more than 84%, just a bit lower than an 85% increase at the end of the March quarter. For the year to date, the shares are up about nearly 42%, up from a 27% gain at the end of the first quarter.

Analysts remain bullish on the stock, with 17 of 27 rating the shares a Buy or Strong Buy. There are two Sell/Strong Sell ratings, and the rest recommend holding shares. The median price target is $413.15, and shares closed Friday at $371.76, implying a potential upside of just over 11%. At the high target of $493, the implied upside is nearly 33%.

For the second quarter, analysts are looking for earnings per share (EPS) of $9.95, up from $0.536 a year ago, but down from $18.60 in the first quarter. The revenue estimate of $12.17 billion is 8.4% below the second quarter of last year and 31% lower than first-quarter revenue. For the full fiscal year, analysts forecast revenue of $50.73 billion, up 13.8%, and EPS of $45.83, up 85% year over year.

The stock currently trades at around 8.3 times expected 2021 EPS, 10.5 times estimated 2022 EPS and 10.1 times estimated 2023 earnings. The stock’s 52-week range is $185.52 to $3393.265, and Goldman Sachs pays an annual dividend of $5.00 (yield of 1.34%).

JPMorgan

JPMorgan Chase & Co. (NYSE: JPM) has posted a share price gain of nearly 72% over the past 12 months. At the end of the first quarter, the 12-month gain was 57%. For the year to date, the share price is up nearly 25%, but that’s down from around 33% in early June.

Of 27 analyst ratings on the stock, 17 are Buy or Strong Buy, while eight analysts rate the stock a Hold and two recommend selling the stock. The median price target is $168, and shares closed last Friday at $155.77, indicating upside potential of about 7.9%. At the high target of $200, upside potential is more than 23%.

For the second quarter, analysts expect JPMorgan to report EPS of $3.18 on revenue of $29.74 billion. That’s a 130% jump in EPS on a revenue decrease of nearly 13%. Estimated third-quarter results call for EPS of $2.82 (down 3.4% year over year) on a 0.5% decline in revenue. For the full fiscal year, EPS is currently expected to rise by 50.7% to $13.38, while revenue is forecast to rise by less than 1% to $120.57 billion.

The stock currently trades at around 11.7 times expected 2021 EPS, 13.1 times estimated 2022 EPS and 12.0 times estimated 2023 earnings. The stock’s 52-week range is $91.38 to $167.44, and JPMorgan pays an annual dividend of $3.60 (yield of 2.34%).

PepsiCo

PepsiCo Inc. (NYSE: PEP) has added more than 14% to its share price over the past 12 months. The year-to-date increase has been a meager 2%, however. Still, Pepsi is among the Dividend Aristocrats and, as a consumer staple, is viewed as able to weather a potential market sell-off.

Of 23 analyst ratings on the shares, 12 are Buy or Strong Buy and another 10 are Holds. At a recent price of around $149, the potential upside to the median price target of $155.70 is about 4.5%. At the high target near $162, the potential upside is about 12%.

Analysts expect Pepsi to post EPS of $1.53 on sales of $17.98 billion for the second quarter. Last year, second-quarter EPS was $1.32 on sales of $15.95 billion.

Pepsi stock trades at a multiple of 24.5 times to expected 2021 EPS, 22.6 times to estimated 2022 EPS and 20.9 times to estimated 2023 earnings. The stock’s 52-week range is $128.32 to $149.77, and the company pays an annual dividend of $4.30 (yield of 2.88%).