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J.P. Morgan’s Stock Rallies 3% after 4Q15 Earnings Beat Estimates

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Jan. 18 2016, Updated 10:07 a.m. ET

Performance review

On January 14, J.P. Morgan (JPM) reported its 4Q15 adjusted earnings per share of $1.40, beating consensus estimates of $1.27. By 1:40 PM EST, shares of the company rallied 3% to $59.06 following the strong earnings.

[marketrealist-chart id=968714]

In 2015, shares of J.P. Morgan have risen 5.6%. However, in 2016 to date, shares of the company have plunged 10.4% as global weakness has wreaked havoc on financial markets.

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Analysts expect further upside

With an average consensus price target of $73.10 and a median target estimate of $73, the stock is still at a discount of 19% compared to analyst expectations. This suggests that Wall Street is upbeat about the stock despite the recent weakness.

Among the 36 analysts following the stock, 27 are upbeat on it and think it should be bought at current levels. Shares of J.P. Morgan haven’t received any “sell” ratings and currently have nine “hold” ratings. After the strong 4Q15 results, we may see some of these hold ratings being converted to buys.

Valuations

Shares of J.P. Morgan trade at a price-to-book multiple of 0.99x and a one-year forward price-to-earnings multiple of 9.5x. The average price-to-book multiple for banks in the XLF ETF is 1.06x. Thus, the bank is slightly cheaper than the industry average. Meanwhile, banks are trading at a one-year forward price-to-earnings multiple of 11x.

Large-capped peers Wells Fargo (WFC), Citigroup (C), and Bank of America (BAC) are trading at price-to-book multiples of 1.53x, 0.68x, and 0.68x, respectively.

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