Big bank stocks are relatively cheap but earnings expected to decline; finance sector remains attractive

From Nasdaq: 2024-10-04 18:23:00

JPMorgan and Wells Fargo have experienced a decrease in stock value since August, with JPM down -7% and Wells Fargo down -3.5%. Renewed economic growth worries and lower interest rates have impacted earnings. Loan demand remains low, while credit quality in commercial real estate is a concern. JPMorgan is expected to report a decrease in earnings of -6.7% year-over-year. Wells Fargo’s earnings are expected to decline by -8.6% year-over-year. The Zacks Major Banks industry is expected to earn -15.7% less earnings in Q3 of 2024. Despite recent underperformance, big bank stocks are still relatively cheap based on valuation metrics. The Finance sector represents an attractive investment opportunity for those anticipating a soft landing for the economy. Q3 earnings for the S&P 500 are expected to be up +3.3% with +4.5% higher revenues. Important sectors like Transportation, Energy, Business Services, and Aerospace have seen significant declines in earnings estimates for Q3. Despite negative revisions, an accelerating growth trend is expected in the coming periods. The overall earnings picture for the year shows a +7.8% growth rate, increasing to +9.7% ex-Energy. 21 S&P 500 members have already reported Q3 earnings with a total increase of +20.3% from the same period last year.



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