JPM, ITW, GPC, GE

S&P 500: +13.06 (+1.53%)


J.P. Morgan Chase (JPM) +2.09%
JPMorgan reported lower first-quarter earnings, but was able to beat expectations thanks to strong revenue gains of 48 percent year-over-year. The decline in earnings was driven by a higher provision for loan losses, which nearly doubled from a year ago to $8.6 billion, as well as a higher noninterest expense.

As of March 31, JPMorgan’s Tier 1 capital ratio stood at 11.3 percent, or 9.2 percent excluding TARP capital from the government. The company’s tangible equity ratio rose to 4.3 percent from 4 percent.

JPMorgan wants to pay back the money it received last year from TARP, but doesn’t plan to raise capital like Goldman Sachs. CEO James Dimon said the company is “waiting for guidance from the government” regarding how and when they could repay the TARP funds.


Illinois Tool Works (ITW) +6.39%
Shares of Illinois Tool Works rose after reporting first-quarter profit that easily beat both analysts’ forecasts as well as their own, which they had reduced last month. Revenues dropped 23.8 percent year-over-year to $2.91 billion, as the company faces challenges across nearly all of its end markets.

The company provided a second-quarter forecast, but declined to give full-year guidance until “long-term visibility becomes more reliable.” The positive takeaways were the efficiency with which the company is managing its working capital and the idea that the most challenging quarter could now behind them.


Genuine Parts Co (GPC) +9.70%
Genuine Parts shares were higher as first-quarter earnings topped expectations. Net income fell 28 percent as weak consumer spending and declining industrial production hurt sales.

CEO Thomas Gallagher said, “the effects of a slow economy are likely to persist for several more quarters,” but he expects gradual improvement as the year progresses.


General Electric (GE) +3.72%
GE’s six-hour presentation last month on GE Capital’s holdings and risks soothed investors concerns that the company would need to raise capital. Since then, share prices have risen to levels that more accurately reflect GE’s strong operations and earnings power.

GE Capital has been the focal point of the last few earnings releases, but tomorrow the industrial businesses will be the main event. In particular, we will be looking to see if the $172 billion large-equipment and services backlog has eroded. Standard & Poor’s projects about $38 billion in revenue will be generated in 2009 from the backlog at margins of 25 percent or higher. While some erosion is expected, large levels of could really hurt the company’s free cash flow levels and result in another downward revision to earnings guidance.


Quick Hits

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Peter Lazaroff, Junior Analyst