The upcoming Q1 earnings season is on the horizon, with the leading US banking giants set to kick it off. JPMorgan (NYSE:), Wells Fargo (NYSE:), and Citigroup (NYSE:) are slated to unveil their financial results tomorrow before the market opens.

Investors are not just interested in earnings and sales figures. They are eager to gauge the pulse of the commercial real estate industry and understand the demand for loans, particularly in light of the recent dovish policy shift by the Federal Reserve.

A rise in interest rates generally augments bank profits, but the impact can vary depending on the banks’ business activities.

In this article, we will dissect the financial reports from these major banks, delving into consensus earnings forecasts and scrutinizing the stock outlook from both analysts’ viewpoints and sophisticated models.

One crucial factor we will explore is Fair Value, an exclusive metric provided by InvestingPro. It offers a target price for each stock based on recognized valuation models to help determine whether a stock is currently over or undervalued.

Subscribers to InvestingPro can access in-depth insights into each model used and even customize the selection of models considered for Fair Value calculations to align with their valuation preferences.

Examining Citigroup

Citigroup is anticipated to report a Q1 EPS of $1.29, marking a 53% uptick from the previous quarter but nearly a 30% dip from the same quarter last year.

Sales are projected to hit $20.395 billion, up 16% compared to the previous quarter but down 5% year-over-year.

Analysts have set an average target price of $66.47 for Citigroup’s shares, reflecting a 10.4% increase from the closing price on Wednesday.

Moreover, the InvestingPro Fair Value, which amalgamates 4 financial models tailored to banks, stands at $73.59, representing a 22.3% premium over the current share price.

Assessing JP Morgan

Consensus estimates foresee JP Morgan posting an EPS of $4.11 in Q1, signaling a 35.2% surge from the previous quarter and unchanged from the same period last year.

Anticipated sales are $41.672 billion, up 8% from Q4 2023 and 8.6% higher year-on-year.

However, analysts and valuation models appear cautious about the stock’s potential. The 23 analysts tracking the stock have a target price of $206.81, just 6.5% above the current market price.

InvestingPro’s models lean even more conservatively, assigning a Fair Value of $194.22, slightly below Wednesday’s closing price.

Exploring Wells Fargo

Lastly, Wells Fargo is projected to report an EPS of $1.09 in Q1, marking a 15.5% slump from the previous quarter and an 11.4% decrease year-over-year.

Sales are expected to remain relatively steady compared to the previous year and quarter, around $20.15 billion.

Analysts have set an average target price of $61.36 for Wells Fargo, indicating a 7.7% upside potential from the current price.

InvestingPro’s Fair Value is slightly more optimistic, standing at $63.72, nearly 12% above the current price.

Closing Thoughts

Market consensus points towards JP Morgan leading the pack in earnings and revenue growth. However, analysts and models hint at limited upside potential compared to the other stocks discussed.

In contrast, while Wells Fargo is expected to see a notable decline in earnings, it presents a moderate bullish outlook. Ultimately, Citigroup appears to strike a balance between analysts’ confidence in earnings quality and the stock’s potential for upward movement.

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