The Earnings Season start this week. Here are key point traders have to watch
In the United States, companies are required to release their earnings every quarter. This happens because companies have to update their investors about their performance in three months.
While companies release their earnings every quarter, the so-called earnings season happens four times every year when the big banks report.
And This is the week where big banks in the US start to release their earnings.
Earnings Season Kicks Off
On Tuesday, big banks like JP Morgan, Goldman Sachs, Citi and Wells Fargo released their earnings. They will be followed by other big banks like Bank of America, Bank of New York, and Morgan Stanley.
In between there will be other key companies that will report.
Over the years, traders have looked closely to the financial institutions because of their significance to the economy. These companies tell whether the economy is doing well or not. These companies have also emerged as some of the key indicators of the performance of other companies.
→ Five Key Metrics to Look at When Trading Stocks During the Earnings Season
Key indicators for traders
The first main thing that traders will be watching will be the headline numbers. For JP Morgan, traders expect the company to report quarterly revenues of more than $28.36 billion and an EPS of $2.46.
In the past quarter, the company had revenue of $28.8 billion and an EPS of $2.82.
For Goldman Sachs, they expect revenue of $8.33 billion and an EPS of $4.91. This will be lower than the previous revenue of $9.46 billion and EPS of $5.81.
In addition, Citigroup is expected to release revenue of $18.54 billion and an EPS of $1.95. This will be lower than last quarter’s revenue of $18.76 billion and $1.83.
For Wells Fargo, traders expect the company to have revenue of $21.32 billion and an EPS of $1.18.
Morgan Stanley is expected to have revenue of $9.63 billion and an EPS of $1.12.
The chart below shows the performance of these banking giants this year.
Other than the headline numbers, traders will be looking at the FICC revenue. FICC stands for Fixed Income, Currencies, and Commodities revenue. This is an important metric that shows revenue that is generated from trading operations. This is usually the most profitable segment of these banks.
However, in recent years, the revenue from the segment has been declining.
Traders will also be looking at the impact of the recent interest rate cuts.
In the past two months, the Federal Reserve has slashed interest rates by 50-basis points. This is usually a negative factor for banks because they make less money in rates. The Fed is also expected to slash rates one more time this month.
Therefore, traders will want to see the impact of these rate cuts to the banks’ earnings. This will also help them prepare for the next earnings.
Finally, traders will want to see the impact of the ongoing trade war to bank stocks.
Recent data has shown that the US economy is weakening. The employment data released earlier this month showed that the economy added less number of jobs. Wages also declined.
Meanwhile, the manufacturing activity has declined to the lowest level since the financial crisis of 2008.
Therefore, traders will want to see how these will affect the banks stocks.
External Useful Resources
Bank earnings preview: The good times are coming to an end – Marketwatch
Big bank earnings are about to kick off—here are 3 ways to play the deluge – CNBC