Which 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:

The Goldman Sachs Group, Inc. (NYSE:GS): Current Price $144.45

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 53,580 51,670 45,970 36,790 41,660
Diluted EPS ($) 4.47 22.13 13.18 4.51 14.13

Goldman Sachs has rather volatile numbers on revenue and earnings during these past five years.

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 ($) in millions 8,016 11,800 8,592 10,140 11,130
Diluted EPS ($) 1.94 3.92 1.78 2.85 5.60

The picture from the last three quarters, however, is pretty rosy. EPS numbers have leapt up and revenue has also grown nicely. We’ll keep our lens on this one for now…

JPMorgan Chase & Co. (NYSE:JPM): Current Price $46.46

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 101,490 115,630 115,480 110,840 108,180
Diluted EPS ($) 1.35 2.26 3.96 4.48 5.20

Revenue has been falling relentlessly since 2009, but surprise: earnings have grown every year since then.

Let’s take a look at the quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 24,390 29,090 25,130 27,800 26,160
Diluted EPS ($) 0.91 1.19 1.21 1.40 1.39

JP Morgan grew quarterly earnings nicely between December 2011 and September 2012, but December 2012 fell off a bit. We’ll look elsewhere…

Citigroup, Inc. (NYSE:C): Current Price $41.66

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 104,350 108,190 111,700 102,590 90,710
Diluted EPS ($) -56.30 -7.99 3.54 3.63 2.44

Both revenue and earnings have fallen since 2010, and quite obviously, this mega-bank is under-performing its peers.

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 22,890 25,000 24,080 18,970 22,800
Diluted EPS ($) 0.32 0.95 0.95 0.15 0.38

Quarterly earnings are not consistent and the bank fails our requirement for growth across at least two quarters…

Bank of America (NYSE:BAC): Current Price $11.14

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 113,110 150,450 134,190 115,070 100,080
Diluted EPS ($) 0.54 -0.29 -0.37 0.01 0.25

We’re concerned that revenue at Bank of America has been falling off ever since 2009. Earnings after 2010 have improved considerably however.

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 29,600 26,890 26,410 24,470 22,310
Diluted EPS ($) 0.18 0.03 0.19 0.00 0.03

Revenue has fallen every quarter since December 2011, and earnings too are nothing to write home about. We’ll pass on this one…

Wells Fargo & (NYSE:WFC): Current Price $34.93

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 51,630 98,640 93,250 87,600 91,250
Diluted EPS ($) 0.70 1.75 2.21 2.82 3.36

Wells Fargo has grown its annual earnings pretty nicely over the period after the financial crisis. Revenue, however, has not grown after 2009.

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 22,090 23,000 22,610 22,480 23,160
Diluted EPS ($) 0.73 0.75 0.82 0.88 0.91

The quality of earnings growth in the annual numbers is visible on the quarterlies too. Wells Fargo has improved its EPS number every quarter since December 2011.

Picking Wells Fargo as the super bank of choice is a no-brainer. Its quality of earnings is head and shoulders above peers and it passes our “E-Squared” investment analysis with flying colors.

“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!