Q1 earnings season starts today Q1 earnings season starts today Q1 earnings season starts today

Q1 earnings season starts today

Equities 4 minutes to read
Peter Garnry

Head of Equity Strategy

Key points

  • Financials are an attractive sector for investors due to their high dividend yield, potential for stock buybacks, and earnings growth. This is especially true compared to other sectors besides energy.

  • Today is a significant day for financials because large banks like JPMorgan Chase are reporting earnings. Their performance will impact the entire sector.

  • JPMorgan Chase in particular is seen as a strong investment due to its superior stock price performance and earnings growth over the past five years.

Financials are attractive

The Q1 earnings season has in theory already started, but this Friday is seen as the first day because it is the day with the first large cap companies reporting. Today’s key earnings focus is on JPMorgan Chase, Wells Fargo, and Citigroup all reporting before the US market opens.

Despite US technology stocks being the main driver of US equities due their large sector weight of 30% in S&P 500, the financials sector is still the second largest sector with a weight of 12.8% and banks such as those reporting today are crucial in our credit-driven economy. Therefore investors should still pay attention to financials.

In our recent Q2 2024 Quarterly Outlook we highlight financials as a sector that we have a positive view on because of an attractive dividend yield and buyback yield as the table below shows. It is only the energy sector that has a more attractive direct shareholder yield. While the energy sector is not expected to have great real earnings growth, financials are expecting to track the long-term trend in the economy and when you add it all up financials are the third most attractive sector.

The higher for longer interest rate scenario that is playing out will also add meaningfully earnings growth for many financials and especially banks as they roll their balance sheet to higher interest rates. That is why you as an investor should watch today’s earnings and even consider financials in your portfolio.

JPMorgan Chase is in its own league

Of the three financials reporting today, JPMorgan Chase is in its own league over the past five years as Citigroup’s share price is actually down while Wells Fargo’s share price is only up 20% trailing the S&P 500 up 80% by a wide margin. Only JPMorgan Chase up 74% over the past five years have been close to keep up with the technology driven rally which is quite impressive. Their earnings per share growth (see chart) has also been phenomenal up almost 80% reflecting no increased valuation multiple over this period. Investors have been reluctant to change their long-term expectations of banks, so there is a considerable re-pricing scenario that could play out in financial stocks over the next year.

Share price of S&P 500, JPMorgan Chase, Citigroup, and Wells Fargo (indexed) | Source: Saxo

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-hk/about-us/awards.

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.