Big bank earnings are out and the results were positive enough to allay one concern about their valuations, CNBC’s Jim Cramer said Thursday.
Shares of major financial institutions such as JPMorgan Chase and Wells Fargo have rallied since last summer and have far outpaced the market.
Cramer, himself an alum of the Goldman Sachs investment store, said their quarterly figures needed to be strong enough to support their current valuations.
“We have one less thing to worry about now that earnings season is rolling. The banks are doing pretty damn well, even if their stocks don’t necessarily reflect that,” said the host of “Mad Money.”
JP Morgan, Goldman and Wells Fargo all posted results Wednesday, followed by Citigroup and Bank of America the next day. Despite each company showing top and bottom line beats in the first quarter of this year, their stock trades diverged in the wake of their reports.
After reviewing the reports, Cramer redoubled his belief that the banks are worth falling behind.
“I’m still optimistic about the financial situation, especially investment banks like ‘Goldman Slacks’ and turnaround plays like Wells Fargo,” he said. ‘After these figures, the banks have become dirt cheap. Believe me, they won’t stay that way. ‘
Below is an overview of Cramer’s response to the earnings reports of the five financial giants:
Goldman Sachs
- Income $ 18.60 per share versus $ 10.22 per share expected by analysts polled by Refinitiv.
- Revenue: Expected $ 17.7 billion versus $ 12.6 billion.
“The numbers were so strong, I’m bringing back the old [nickname] … I call them ‘Golden Slacks,’ Cramer said. If it traded at ten times earnings, this would be a $ 413 share … I bet that’s where it’s going, especially now that Goldman has permission to buy back stock. ”
JPMorgan
- Income $ 4.59 per share versus $ 3.10 per share expected by analysts polled by Refinitiv.
- Revenue: Expected $ 33.12 billion versus $ 30.52 billion.
“For me this was the second best report from yesterday, although the market seemed to disagree when investors sold the news. But make no mistake, the numbers were fantastic,” he said. “I think the drop in JP Morgan stock is a buying opportunity, plain and simple, and obviously someone would agree as the stock started to recover today.”
Wells Fargo
- Income $ 1.05 in earnings per share versus 70 cents per share expected, according to Refinitiv.
- Revenue: Expected $ 18.06 billion versus $ 17.5 billion.
“Wells Fargo roared yesterday because this is seen as more of a turnaround than a banking story, which is why we actually own it for my charity,” Cramer said. “I keep telling you it’s a better buy than JP Morgan because expectations for Wells are much lower, and they definitely hit that low bar yesterday.”
Citi
- Income: $ 3.62 per share, versus $ 2.60 per expected share, according to Refinitiv.
- Revenue: $ 19.3 billion, versus $ 18.8 billion expected
“Like the banks that reported yesterday, Citi gained a lot of strength in investment banking, but traditional consumer banking was a lot less impressive,” he said. “If I had to rank this quarter, you know what, I’d put it right below JP Morgan’s.”
bank of America
- Income 86 cents per share, versus 66 cents per share expected by analysts polled by Refinitiv.
- Revenue: $ 22.9 billion, versus $ 22.1 billion expected.
“It got the worst reaction from the market. I’m going to say the market is wrong. It’s down nearly 3% today. I thought it was offensive,” said Cramer. “There was nothing out of the ordinary in the quarter itself. Don’t despair. If we get a few rate hikes, this is the only one you own, and we will eventually get it.”
Disclosure: Cramer’s charity owns stock in Wells Fargo.
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