Investing

BlackRock, Citigroup, JPMorgan, UnitedHealth, Wells Fargo: The New Earnings Season Begins

Paul Ausick

Published: October 11, 2023 11:21 am

While the new earnings season gets started with three firms reporting Thursday morning, the first big drop comes Friday morning when four financial giants and the country’s largest health insurer report results for the September quarter.

Before U.S. markets open on Thursday, Commercial Metals, Delta Air Lines, and Walgreens will report quarterly results.

There were no notable earnings reports on Wednesday morning.

BlackRock

The world’s largest investment management firm, BlackRock Inc. (NYSE: BLK), reportedly had assets under management totaling around $9.4 trillion at the end of the second quarter. The stock’s price has risen by nearly 18% over the past 12 months, although shares have lost about 9.4% since January.

BlackRock and many others await an SEC decision on applications to launch a spot Bitcoin ETF. Meanwhile, the firm partnered with JPMorgan to tokenize shares of one of BlackRock’s money market funds. Using its own and JPMorgan’s blockchains, BlackRock transferred the shares to Barclays, where they were used as collateral in an over-the-counter derivatives trade. This was the first-ever blockchain-based collateral settlement transaction, according to CoinDesk.

Analysts remain bullish on BlackRock, with 13 of 16 having a Buy or Strong Buy rating. The rest rate the stock at Hold. At a recent price of around $642.00 a share, the upside potential based on a median price target of $754.00 is about 17.4%. At the high price target of $880.00, the upside potential is 37.1%.

Third-quarter 2023 revenue is forecast at $4.56 billion, up by 2.2% sequentially and by 5.8% year over year. Adjusted earnings per share (EPS) are forecast at $8.42, down 9.3% sequentially and 11.8% lower year over year. For the full fiscal year, analysts anticipate EPS of $34.89, down about 1.3%, on sales of $118.98 billion, up 0.6%.

BlackRock stock trades at 18.4 times expected 2023 EPS, 16.5 times estimated 2024 earnings of $39.02 and 14.8 times estimated 2025 earnings of $43.50. Its 52-week trading range is $503.12 to $785.65. Blackrock pays an annual dividend of $20.00 (yield of 3.12%). Total return to shareholders for the past 12 months was 21.09%.

Citigroup

Shares of Citigroup Inc. (NYSE: C), the fifth-largest U.S. bank (by market cap), have dropped about 0.4% over the past 12 months. For the year to date, shares are down about 8.4%.

Among the four big banks, analysts expect Citi to have the second-largest total loan write-offs ($1.6 billion, according to Bloomberg). The big banks are also expected to report higher unrealized losses for the third quarter. Rising bond yields have eaten away at banks’ investments. Net interest income, a staple of revenue, is also expected to decline at the banks. Customers are not borrowing, increasing the costs the banks must pay in interest on deposits.
Of 24 brokerages covering Citigroup stock, just nine have a Buy or Strong Buy ratings, and 14 have Hold ratings. At a share price of around $41.80, the upside potential based on a median price target of $47.50 is 13.6%. At the high price target of $81.00, the upside potential is about 93.8%.

Analysts are calling for third-quarter revenue of $19.28 billion. That would be down 0.8% sequentially but up 4.2% year over year. Adjusted EPS are forecast at $1.22, down 11.0% sequentially and down 25.2% year over year. For the full 2023 fiscal year, analysts expect EPS of $5.71, down 19.7%, on revenue of $79 billion, up 4.9%.

Citigroup stock trades at 7.3 times expected 2023 EPS, 7.0 times estimated 2024 earnings of $5.95 and 6.0 times estimated 2025 earnings of $6.93. The 52-week trading range is $39.14 to $53.23, and Citi pays an annual dividend of $2.06 (yield of 4.97%). Its total return to shareholders for the past year was 4.82%.

JPMorgan Chase

The largest (by market cap) of the big U.S. banks is JPMorgan Chase & Co. (NYSE: JPM). It has seen a share price jump of 40% over the past 12 months. Since January, the stock is up about 9.6%.

Like Citi, the lack of borrowing raises JPMorgan’s deposit costs. Analysts forecast net interest income to come in about flat with the second-quarter total. Following its acquisition of First Republic, JPMorgan raised its full-year guidance for net interest income from $84 billion to $87 billion.

Of 25 analysts covering the stock, 16 have a Buy or Strong Buy rating. The other nine rate the stock at Hold. At a trading price of around $147.00, the upside potential based on the median price target of $167.00 is 13.6%. At the high price target of $215.00, the upside potential is 46.3%.

Analysts expect JPMorgan to report third-quarter revenue of $39.38 billion, down 4.7% sequentially but 20.4% higher year over year. Analysts have pegged adjusted earnings per share (EPS) at $3.97, down 16.5% sequentially and up 27.2% year over year. For the full 2023 fiscal year, estimates call for EPS of $16.09, up 33.1%, on revenue of $157.82 billion, up 22.6%.

JPMorgan stock trades at 9.1 times expected 2023 EPS, 9.8 times estimated 2024 earnings of $14.92 and 9.8 times estimated 2025 earnings of $14.98. The 52-week range is $101.28 to $159.38. JPMorgan pays an annual dividend of $4.20 (yield of 2.88%). Total shareholder return for the past 12 months was 43.72%.

The country’s largest health insurer, UnitedHealth Group Inc. (NYSE: UNH), has posted a share price increase of 5% over the past 12 months. The company recently raised its full-year earnings guidance, expecting an increase in demand for elective surgeries. That may be a double-edged sword and increase payouts to its customers. To guard against that, UnitedHealth may end up raising rates.

Analysts remain bullish on the stock, with 21 of 25 assigning a rating of Buy or Strong Buy. The other four have Hold ratings. At a share price of around $524.00, the upside potential based on a median price target of $561.00 is 7.1%. At the high target of $650.00, the upside potential is 24%.

The consensus estimate for third-quarter revenue is $91.41 billion, down 1.6% sequentially and up 13.0% year over year. Analysts expect adjusted EPS of $6.36, up 3.6% sequentially and by 9.8% year over year. For the full 2023 fiscal year, analysts are forecasting EPS of $24.87, up 12.1%, on revenue of $367.77 billion, up 13.5%.

UnitedHealth stock trades at 21.0 times expected 2023 EPS, 18.7 times estimated 2024 earnings of $27.95 and 16.6 times estimated 2025 earnings of $31.56 per share. The 52-week trading range is $445.68 to $558.10. The Dow Jones industrial average component pays an annual dividend of $7.06 (yield of 1.35%). Total shareholder return for the past 12 months was 6.47%.

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Wells Fargo

Wells Fargo & Co. (NYSE: WFC) is the nation’s third-largest bank. Its share price has dipped by about 3.7% over the past 12 months, virtually all of it coming in the year to date. Analysts expect net interest income for the third quarter to be in line with ‌prior-quarter results.

The Consumer Financial Protection Bureau (CFPB) on Wednesday issued an advisory opinion regarding the banking industry’s so-called junk fees. According to the CFPB, Wells Fargo charged overdraft fees totaling $1.4 billion in 2021. The bank no longer charges that fee.

Analysts remain moderately bullish about Wells Fargo. Of 27 brokerages covering the bank, 10 have a Hold rating and 17 have a Buy or Strong Buy rating . At a share price of around $40.00, the upside potential based on a median price target of $51.00 is 27.5%. At the high price target of $61.00, the upside potential is 52.5%.

Analysts are expecting third-quarter revenue to total $20.07 billion, down 2.3% sequentially but 2.9% higher year over year. Analysts forecast adjusted EPS at $1.24, down 1.1% sequentially and by 4.6% year over year. For the full 2023 fiscal year, the consensus EPS forecast calls for a year-over-year increase of 9.1% to $4.86, on a 9.9% revenue increase to $81.11 billion.

Wells Fargo stock trades at 8.2 times expected 2023 EPS, 8.4 times estimated 2024 earnings of $4.71 and 7.7 times estimated 2025 earnings of $5.14. The 52-week trading range is $35.25 to $48.84. Wells Fargo pays an annual dividend of $1.40 (yield of 3.52%), and total shareholder return for the past 12 months was negative 1.03%.