Which 5 Mega-Bank Stocks have the Strongest Earnings Trends?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

Stocks with improving earnings metrics are worthy of your extra attention. Click here to discover our CHEAT SHEET stock picks now!

Here’s your Cheat Sheet to how the top 5 mega-bank stocks rank via earnings trends:

5) Citigroup (NYSE:C): Current Price $42.34

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 153,260 104,350 108,190 111,700 102,590
Diluted EPS ($) 6.70 -56.30 -7.99 3.54 3.63

Well, it doesn’t take a rocket scientist to see Citigroup almost went bust in 2008. The company has at least regained some sea legs, but 2011 wasn’t anything to write home about.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 26,860 22,890 25,000 24,080 18,970
Diluted EPS ($) 1.23 0.32 0.95 0.95 0.15

As you’ll see below, last quarter wasn’t the best for financials. However, Citigroup saw much higher declines than the stocks below…

4) Bank of America (NYSE:BAC): Current Price $11.63

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 119,700 113,110 150,450 134,190 115,070
Diluted EPS ($) 3.29 0.54 -0.29 -0.37 0.01

Bank of America has been a complete mess. However, the company recently received an upgrade from star banking analyst Meredith Whitney.

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 33,820 29,600 26,890 26,410 24,470
Diluted EPS ($) 0.56 0.18 0.03 0.19 0.00

Although revenues declined less than Citigroup, last quarter Bank of America returned ZERO earnings to shareholders. However, if upcoming earnings shows major strides for earnings per share, the stock could get a huge boost.

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3) American Express (NYSE:AXP): Current Price $61.24

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 31,920 26,540 30,000 32,280 33,223
Diluted EPS ($) 2.32 1.54 3.35 4.12 4.40

Ah, a company that didn’t fall off the planet in 2008. Well, American Express did become a bank to avoid a major financial crunch, but it looks like the strategy paid off handsomely.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 8,317 8,188 8,515 8,420 8,100
Diluted EPS ($) 1.02 1.07 1.15 1.09 1.09

American Express announced earnings early on January 10, after hours. The company announced some significant layoffs. However, investors still bid up the stock. Earnings per share is flat quarter-over-quarter, so we’d like to see more strength from AXP before diving in deeper.

2) Wells Fargo (NYSE:WFC): Current Price $35.10

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 51,630 98,640 93,250 87,600 90,040
Diluted EPS ($) 0.70 1.75 2.21 2.82 3.36

On the surface, Wells Fargo has lovely annual EPS numbers. However, behind the curtain the company has had to play crazy games to keep up appearances.

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 22,090 23,000 22,610 22,480 21,950
Diluted EPS ($) 0.73 0.75 0.82 0.88 0.91

Unlike the previous three companies, Wells Fargo satisfies our CHEAT SHEET investing framework because they have achieved earnings growth 2 quarters in a row. As a result, WFC deserves more research to determine if you conclude it’s an investment opportunity.

1) JPMorgan Chase (NYSE:JPM): Current Price $46.14

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 116,350 101,490 115,630 115,480 110,840
Diluted EPS ($) 4.33 1.35 2.26 3.96 4.48

By the looks of the annual earnings per share, you’d never know JPM was at the epicenter of the economic crisis. Wall Street can do amazing things.

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 27,110 24,390 29,090 25,130 27,800
Diluted EPS ($) 1.02 0.91 1.19 1.21 1.40

Regardless, JPMorgan has held the title of safest bank stock relative to the previous four. Although CEO Jamie Dimon was caught missing some important risk-management protections, he is still widely regarded as the smartest steward in rough waters. JPM also satisfies our standard for quarterly earnings growth. If you are interested in long term investments in the banking sector, JPMorgan should definitely be on your short list.

“E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our successful CHEAT SHEET investing framework. Don’t waste another minute — click here to discover our CHEAT SHEET stock picks now!