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Earnings Previews: BlackRock, Citigroup, JPMorgan Chase, State Street Corp., UnitedHealth Group, Wells Fargo

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The June quarter earnings season gets rolling this week, with earnings reports for several of the largest U.S. banks due Friday morning.

Before U.S. markets opened Wednesday morning, the Bureau of Labor Statistics reported that the Consumer Price Index rose 0.2% month over month in June, less than the consensus forecast for a rise of 0.3%. Core CPI, excluding food and energy, also rose by 0.2% month over month. Year over year, CPI dropped from 4% to 3%, and core CPI fell from 5.3% to 4.8%.

Before markets open Thursday morning, Conagra, Delta Air Lines, and PepsiCo will report June quarter earnings.

No earnings reports of note are due out late Thursday, but Friday morning will be the unofficial kick-off for this earnings season, with five major U.S. financial institutions reporting quarterly results.

BlackRock

The world’s largest investment management firm, BlackRock Inc. (NYSE: BLK), reported assets under management totaling $9.1 trillion at the end of the first quarter. That total was about $900 billion less than in December 2021. March quarter revenue was essentially equal to the Street estimate, and adjusted earnings per share were 2.6% better than the consensus. Last month, the company applied to launch a Bitcoin spot ETF, one of many such applications from big money managers. Now, everyone is just waiting for the SEC to rule. BlackRock shares have gained more than 17% over the past 12 months.

Analysts remain bullish on the firm, with 13 of 16 giving the shares a Buy or Strong Buy rating and the rest rating the stock a Hold. At the current price of around $710.00, the upside potential on the shares based on a median price target of $777.00 is about 9.4%. At the high price target of $928.00, the upside potential is 30.7%.

Second-quarter 2023 revenue is forecast at $4.45 billion, up by 5% sequentially and down 1.8% year over year. Adjusted earnings per share (EPS) are forecast at $8342, up 6.2% sequentially and up 14.4% year over year. For the full fiscal year, analysts are currently forecasting EPS of $34.90, down about 1.3%, on sales of $18.19 billion, up 1.8%.

BlackRock stock trades at a multiple of 20.4 times expected 2023 EPS, 17.6 times estimated 2024 earnings of $40.31, and 15.3 times estimated 2025 earnings of $46.39. The stock’s 52-week range is $503.12 to $785.65. Blackrock pays an annual dividend of $20.00 (yield of 2.87%). Total return to shareholders for the past 12 months was 20.83%.

Citigroup

The fifth-largest U.S. bank (by market cap), Citigroup Inc. (NYSE: C) stock has added just 0.7% to its share price over the past 12 months. The bank surprised to the upside for both revenue and EPS in the March quarter and has beaten the Street revenue estimate for nine consecutive quarters. Citi’s share price has barely changed since the end of March, although there have been some ups and downs. Loan volumes are a concern going forward, as is a drop in M&A activity.

Of 24 brokerages covering the company, just 8 have a Buy or Strong Buy rating on the shares, and 15 have a Hold rating. At a current price of around $46.50, the upside potential based on a median price target of $50.00 is 7.5%. At the high price target of $84.00, the upside potential is about 80.6%.

Second-quarter revenue is forecast at $19.35 billion, down 9.8% sequentially and down 1.5% year over year. Adjusted EPS is forecast at $1.41, down 35.4% sequentially and down 38.7% year over year. For the full 2023 fiscal year, analysts are currently forecasting EPS of $5.97, down 16%, on revenue of $78.9 billion, up 4.7%.

Citigroup stock trades at a multiple of 7.8 times expected 2023 EPS, 7.3 times estimated 2024 earnings of $6.38, and 6 times estimated 2025 earnings of $7.76. The stock’s 52-week range is $40.01 to $54.56, and Citi pays an annual dividend of $2.04 (yield of 4.38%). Citi’s total return to shareholders for the past year was 5.06%.

JPMorgan Chase

The largest (by market cap) of the big U.S. banks, JPMorgan Chase & Co. (NYSE: JPM)has seen a share price jump of nearly 31% over the past 12 months. At the end of the March quarter, the bank’s stock was down for the preceding 12-month period. Higher interest rates coupled with cooling inflation have given bank stocks plenty of help in the second quarter. Going forward, more Fed rate hikes may reduce the demand for new borrowing, but that’s another day. The second-quarter estimates are certainly beatable, and Morgan could do just that.

Of 25 analysts covering the stock, 17 have a Buy or Strong Buy rating on the shares, while the other 8 rate the stock a Hold. At a current trading price of around $147.50, the upside potential based on the median price target of $160.00 is 8.5%. At the high price target of $212.00, the upside potential is 43.7%.

Analysts are expecting JPMorgan to report second-quarter revenue of $39.12 billion, up by 2% sequentially and up 27.4% year over year. Adjusted EPS is forecast at $3.80, down 7.4% sequentially and up 37.8% year over year. For the full 2023 fiscal year, current estimates call for EPS of $14.68, up 21.4%, on revenue of $152.28 billion, up 18.3%.

JPMorgan stock trades at a multiple of 10.2 times expected 2023 EPS, 9.9 times estimated 2024 earnings of $12.92, and 9.6 times estimated 2025 earnings of $13.36. The stock’s 52-week range is $101.28 to $147.82. The high was posted Tuesday. JPMorgan pays an annual dividend of $4.00 (yield of 2.71%). Total shareholder return for the past 12 months was 34.73%.

UnitedHealth Group

The country’s largest health insurer, UnitedHealth Group Inc. (NYSE: UNH), has posted a share price decrease of more than 10% over the past 12 months. But shares of the Dow 30 component have been sagging since early November of last year and reaching a 52-week low just a month ago. That low-water mark came after the company’s CFO commented on “pent-up demand” driving the medical-loss ratio–the amount insurers spend to provide the services that people pay premiums for–is expected to rise in the second quarter and be higher for the full year. In other words, UnitedHealth is paying out more in benefits than it expected.

Analysts remain bullish on the stock, with 22 of 26 assigning a rating of Buy or Strong Buy to the stock and the other 4 rating the shares a Hold. At a current price of around $463.00, the upside potential based on a median price target of $568.50 is 22.8%. At the high target of $650.00, the upside potential is 40.4%.

The consensus estimate for second-quarter revenue is  $90.95 billion, down 1.1% sequentially and up by 13.2% year over year. Adjusted EPS is tabbed at $6.03, down 3.7% sequentially and up about 8.3% year over year. For the full 2023 fiscal year, analysts are forecasting EPS of $24.85, up 12%, on revenue of $364.52 billion, up 12.5%.

UnitedHealth stock trades at a multiple of 18.6 times expected 2023 EPS, 16.5 times estimated 2024 earnings of $28.08, and 14.6 times estimated 2025 earnings of $31.72 per share. The stock’s 52-week range is $445.68 to $558.10. The Dow 30 component pays an annual dividend of $6.83 (yield of 1.48%). Total shareholder return for the past 12 months was negative 9.21%.

Wells Fargo

Wells Fargo & Co. (NYSE: WFC) is the nation’s third-largest bank, and its share price has risen by 7.4% over the past 12 months, including an increase of 8.6% over the past three months. The bank has beaten EPS estimates for 11 consecutive quarters, and net income for the June quarter is expected to extend that streak, especially since the Street EPS estimate is more than 7% lower than the bank’s first-quarter earnings. If Wells Fargo can keep deposits coming in, expected Fed interest rate hikes for the rest of the year should keep the bank’s investors reasonably satisfied.

Analysts remain bullish about Wells Fargo. Of 27 brokerages covering the bank, 8 have a Hold rating, and 19 have a Buy or Strong Buy rating on the shares. At the current price of around $43.30, the upside potential based on a median price target of $49.50 is 14.3%. At the high price target of $61.00, the upside potential is about 40.9%.

Analysts are expecting first-quarter revenue to total $20.07 billion, down 3.2% sequentially and up 17.9% year over year. Adjusted EPS is forecast at $1.14, down 7.4% sequentially and up 36.6% year over year. For the full 2023 fiscal year, EPS is currently forecast to rise by 4.4% to $4.65, and revenue is expected to increase by 8.5% to $80.05 billion.

Wells Fargo stock trades at a multiple of 9.3 times expected 2023 EPS, 9.4 times estimated 2024 earnings of $4.62, and 8.8 times estimated 2025 earnings of $4.94. The stock’s 52-week range is $35.25 to $48.84. Wells Fargo pays an annual dividend of $1.20 (yield of 2.81%), and total shareholder return for the past 12 months is 12.49%.

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