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JPMorgan Chase & Co. (JPM) Earnings Could Determine the Dow’s Fate

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JPMorgan Chase & Co. (NYSE:JPM) is scheduled to release its quarterly earnings report tomorrow, and there’s a lot riding on what the big bank says about its future. Although most analysts expect a sizable jump in income for the June quarter, the bigger question is whether JPMorgan can sustain its growth in the face of rising mortgage rates and other headwinds that could jeopardize some of its most lucrative sources of high-margin revenue. If the bank can’t succeed in that mission, then the resulting fallout could have negative implications not only for JPMorgan and other banks, but for the entire Dow Jones Industrial Average (Dow Jones Indices:.DJI).

JPMorgan Chase & Co (NYSE:JPM)

With investors still getting over controversies like the “London Whale” scandal and Jamie Dimon’s successful retention of his dual role of chairman and CEO, JPMorgan really needs to get past those distractions and get back to business. Let’s take an early look at what’s been happening with JPMorgan Chase & Co. (NYSE:JPM) over the past quarter and what we’re likely to see in its quarterly report.

Stats on JPMorgan Chase

Analyst EPS Estimate $1.44
Change From Year-Ago EPS 19%
Revenue Estimate $24.84 billion
Change From Year-Ago Revenue 8.5%
Earnings Beats in Past 4 Quarters 4

Source: Yahoo! Finance.

Can JPMorgan face the coming storm?
On the whole, analysts have been extremely optimistic about JPMorgan’s earnings in recent months, boosting their June-quarter estimates by $0.07 per share and raising their full-year 2013 consensus by a full $0.25 per share. The stock has held near multiyear highs recently, having risen nearly 14% since early April.

One reason for the optimism about JPMorgan is that the bank has done exceedingly well in past quarters. Last quarter, net income rose 33% from the previous year’s quarter to a record high, and the bank managed to keep mortgage originations high even as interest rates started to hit bottom and move higher. Improving returns on equity and capital ratios have also helped bolster the bank’s situation.

But JPMorgan Chase & Co. (NYSE:JPM) has had to deal with plenty of distractions during the quarter. A California lawsuit alleged that the bank once again used robo-signing tactics, this time to try to collect debt from credit card customers. Card giants Citigroup Inc. (NYSE:C) and American Express Company (NYSE:AXP) are likely to face similar charges, but the fact that the California attorney general chose to go after JPMorgan first suggests that the AG’s office believes it has a better case against JPMorgan than its peers. In addition, although Jamie Dimon survived his vote of confidence, it nevertheless took attention away from the business of dealing with tough banking conditions.

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