Bull of the Day: JPMorgan (JPM)

JPMorgan Company Overview

Headquartered in New York, NY, Zacks Rank #1 (Strong Buy) stock JPMorgan (JPM) is one of the largest global banks with assets worth ~$5 trillion. With its iconic CEO Jamie Dimon at the helm, JPM has grown into one of the largest financial service firms globally, with operations in more than 60 countries. JPM has four major segments under its umbrella, including:

·       Consumer & Community Banking: Includes bank branches, ATMs, mobile, and website.

·       Commercial & Investment Bank: Offers market-making, prime brokerage, and wholesale payments services to institutions, governments, and municipal entities.

·       Asset & wealth Management: Offers clients global investment management in equities, fixed income, real estate, hedge funds, private equity, and money market instruments.

·       Corporate Segment: Includes corporate staff units and centrally managed expenses.

JPM is in the Interest Rate Sweet Spot

Fed Chair Jerome Powell’s monetary policy stance has been a political ‘hot button’ topic. However, JPM is one of the companies benefiting from the current interest rate levels. With rates near multi-year highs, JPM benefits from higher Net Interest Income (NII), which is the spread between what a bank earns on loans and what it pays out in deposits. While betting markets anticipate that Powell and the Fed will cut interest rates in September, a gradual rate-cutting-cycle should be a net positive for JPM as lower rates can stimulate the market (more M&A & IPOs). In other words, the company will still enjoy fairly robust NII while other sides of the business gain steam.

JPM Delivers Consistent EPS Surprises

JPM CEO Jamie Dimon is the longest-sitting CEO at a major bank (he has been CEO since 2006) – and for good reason. While the macroeconomic environment has been unpredictable and challenging over the past few years, JPM has delivered positive earnings beats versus Zacks Consensus Analyst Estimates in twelve consecutive quarters.

JPM has a Reasonable Valuation

Though JPM shares are near new highs, they are reasonably priced compared to the general market and its peers. JPM has a price-to-earnings ratio of 15.32x, which is significantly lower than the S&P 500’s 24.84x. As tech valuations get more and more stretched, JPM could be a beneficiary of a rotational pullback in high valuation names.

JPM’s Aggressive Growth Strategy

JPMorgan is expanding its global banking footprint aggressively, with plans to open more than 500 new banking branches over the next two years. This move will solidify its position as the most extensive banking network, allowing the company to boost market share and benefit from cross-selling and network effects.

Bottom Line

JPMorgan’s reasonable valuation, its consistent earnings, and its ability to capitalize on favorable interest rate environments set the stock up for continued outperformance.

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This article originally published on Zacks Investment Research (zacks.com).

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