Coffee With Greta: Big Banks Kick Start Earnings
DJIA Futures: -278 (-0.8%)
SPX Futures: -38 (-0.9%)
NASDAQ Futures: -126 (-1.1%)
Good morning friends!
Futures are lower after the biggest banks in the U.S. reported earnings and warned of an impending recession.
Let’s get right to it!
JPMorgan Chase Warns Of Recession
Q4 earnings season kicked off this morning with some of the largest banks in the U.S. reporting.
JPMorgan Chase (JPM) shares are falling 2.8% ahead of the open despite beating expectations.
Here’s how the bank’s results compared to estimates:
- EPS: $3.57 vs $3.07 expected
- Revenue: $35.57 billion vs $34.3 billion expected
Revenue surged 48% year over year as interest rates jumped.
The biggest bank in the U.S. set aside $2.3 billion for credit losses in the quarter, up 49% from Q3 as the bank prepares for a recession.
CEO Jamie Dimon said, “We still do not know the ultimate effect of the headwinds coming from geopolitical tensions including the war in Ukraine, the vulnerable state of energy and food supplies, persistent inflation that is eroding purchasing power and has pushed interest rates higher, and the unprecedented quantitative tightening.”
Bank of America Tops Expectations
Bank of America (BAC) shares are falling 2.7% in premarket trade despite beating Q4 expectations on the top and bottom line.
Here’s a look at the bank’s results vs analysts’ expectations:
- EPS: $0.85 vs $0.77 expected
- Revenue: $24.66 billion vs $24.33 billion expected
Bank of America’s net interest income jumped 29% year over year to $14.7 billion as rates rose.
That was shy of analysts’ expectations of $14.8 billion.
The bank set aside $1.1 billion for loan loss reserves.
CEO Brian Moynihan said the U.S. economic environment is “increasingly slowing.”
Wells Fargo Profits Tumble
Wells Fargo (WFC) shares are dropping 4% ahead of the open after reporting a sharp drop in Q4 profits.
Here’s how the bank’s results compared to analysts’ estimates:
- EPS: $0.67 vs $0.60 expected
- Revenue: $19.7 billion vs $19.98 billion expected
The bank’s profits tumbled 49% year over year compared to EPS of $1.38 in the same quarter a year ago.
That was partly driven by a drop in mortgage banking due to fewer originations or new purchase loans.
Home lending revenue was down 57% last quarter.
Wells Fargo set aside $957 million for credit losses as the economic outlook deteriorates.
CEO Charlie Scharf said, “As we look forward, we are carefully watching the impact of higher rates on our customers and expect to see deposit balances and credit quality continue to return toward pre-pandemic levels.”
Citigroup Tops Q4 Expectations
Citigroup (C) shares are up 0.7% in premarket trade after beating Q4 expectations on the top and bottom line.
Here’s how the investment bank’s results compared to analysts’ expectations:
- EPS: $1.16 vs $1.14 expected
- Revenue: $18 billion vs $17.9 billion expected
But profits tumbled 21% year over year to $2.5 billion vs $3.2 billion one year ago.
As rates jumped, net interest income rose to $13.27 billion vs $12.7 billion expected.
Fixed-income trading revenue topped expectations at $3.16 billion while the $789 million in equities trading revenue was below estimates.
Citigroup set aside $1.85 billion in loan loss reserves, higher than expectations for $1.79 billion.
Delta Drops On Weak Guidance
Delta Airlines (DAL) shares are tumbling 5.3% ahead of the open after beating Q4 expectations but issuing weak guidance.
Here’s how the airline’s results compared to analysts’ expectations:
- Adjusted EPS: $1.48 vs $1.33 expected
- Revenue: $12.29 billion vs $12.23 billion expected
Sales were up 17% compared to Q4 2019.
Operating costs jumped 19% from 2019 and included a $2.8 billion fuel bill, up 42% year over year.
CEO Ed Bastian said Delta “rose to the challenges of 2022, delivering industry-leading operational reliability and financial performance.”
But the airline expects profits to fall in the current quarter.
Delta forecast Q1 adjusted EPS of just $0.15 to $0.40 and revenue growth of 14% to 17% over 2019 levels.
The company also expects unit costs, excluding fuel, to increase by 3% to 4% from last year.
Delta reiterated its full-year outlook for earnings of $5 to $6 per share.
Tesla Falls After Cutting Prices
Tesla (TSLA) shares are down 5.9% in premarket trade after cutting its prices in the U.S. and Europe.
The electric automaker lowered the starting price of its Model 3 and Model Y.
In the U.S., the Model 3 now starts at about $44,000.
That’s down about 6% from the previous price.
The performance version of the Model 3 was lowered to $54,000 from $63,000.
The long-range version of the Model Y is now listed for about $53,000, down 20% from $66,000.
The performance version of the Y was lowered to $57,000 from $70,000.
Although Tesla did not comment on the changes many are speculating the move was aimed at qualifying for U.S. tax credits.
Electric vehicles priced below $55,000 qualify for the $7,500 purchase tax credit passed in the Inflation Reduction Act.
The lower prices are also expected to stimulate demand in the U.S.
Tesla also cut its Model 3 and Y prices in Europe by as much as 17%.
In Case You Missed It
- Lucid Group (LCID) shares jumped 4.8% Thursday after the electric automaker reported stronger 2022 production numbers than expected. Lucid said it produced 7,180 vehicles last year. That was higher than its previous outlook for production of between 6,000 and 7,000 vehicles for the full year. The company produced 3,943 vehicles in Q4, up 53% from Q3.
