JPMorgan, BlackRock, Delta Air Lines Set To Kick Off Q3 Earnings Season

JPMorgan Chase (JPM) and Delta Air Lines (DAL) highlight the latest earnings calendar as third-quarter earnings season gets underway. A strong earnings season could be the next upside catalyst for the stock market despite worries about a slowdown for the U.S. economy and heightened tensions in the Middle East.

A strong jobs report early Friday fueled more gains for the major indexes.

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A couple of other financial stocks are on the earnings calendar. Asset manager BlackRock (BLK) reports early Friday along with Wells Fargo (WFC).

BlackRock has been a top performer in the investment management group after it cleared a flat base on July 16. Wells Fargo, on the other hand, has been on a downtrend since May with revenue expected to decline on  a year-over-year basis for at least the next four quarters, including Q3.

Earnings Calendar Spotlight

JPMorgan hasn’t recovered much after plunging through its 50-day moving average on Sept. 10. Sellers hit the stock hard after Chief Financial Officer Daniel Pinto said lower interest rates would hurt its net interest income: the difference between what the bank makes on loans and pays out on deposits.

In July, JPMorgan reported adjusted profit of $4.26 a share, up 3% from the year-ago quarter. Revenue increased 22% to $50.2 billion. The results were helped by strength in investment banking fees, which jumped 46% year over year to $2.5 billion, just above the company’s prior guidance.

CEO Jamie Simon, who’s been pointing out risks to the economy for several months now, had this to say: “While market valuations and credit spreads seem to reflect a rather benign economic outlook, we continue to be vigilant about potential tail risks, including a changing geopolitical situation, which remains the most dangerous since World War II.”

For Q3, the FactSet consensus is for JPMorgan to earn $4 a share, down 8%, with revenue up 4% to $41.5 billion. Results are due early Friday.

JPMorgan stock has been battling for support near its 10-week moving average, but it’s been a losing effort so far. The stock is poised for its third straight weekly close below the 10-week line.

Delta Air Lines, Byrna In Focus

After three straight weekly gains, helped in part by falling oil prices, Delta Air Lines looked like it was ready to break out to new highs. But early Friday, Delta showed a weekly decline of around 4%, this time hurt by surging oil prices after Iran fired missiles at Israel. The oil market is still on edge as it awaits Israel’s response.

In Q2, Delta reported record revenue of $16.7 billion, up 7% year over year, but earnings fell 12% to $2.36 a share. Increased capacity resulted in lower fares amid higher costs, with operating expenses up 10% in the quarter.

Delta gapped down sharply on the news, but the stock pared a 10% intraday loss to 4% by the close.

For Q3, revenue is expected to increase 1% to $14.6 billion, with earnings down 24% to $1.54 a share. Delta’s report is due Thursday before the open.

Meanwhile, small cap Byrna Technologies (BYRN) is also on the earnings calendar. It’s not a household name with a market capitalization below $500 million and an average daily volume of just under 400,000 shares. But the maker of nonlethal, self-defense weapons has reported huge increases in the past two quarters.

In the company’s latest quarter ending in May, revenue jumped 76% to $20.3 million. For the February-ended quarter, revenue soared 98%.

Fiscal third-quarter revenue is expected to accelerate sharply, up 194%

For the company’s fiscal third quarter ending in August, revenue growth is expected to accelerate sharply, up 194% to $20.8 million. Byrna reports early Wednesday.

Byrna is holding near highs after a huge gain since the stock’s upside reversal in the week ended Aug. 9. After eight straight weekly gains, Byrna was on track for another up week early Friday.

Options Trading Strategy

A basic options trading strategy around earnings — using call options — allows you to buy a stock at a predetermined price without taking a lot of risk. Here’s how the option trading strategy works, and what a call-option trade recently looked like for JPMorgan.

Time The Market With IBD’s ETF Market Strategy

First, identify top-rated stocks with a bullish chart. Some might be setting up in sound early-stage bases. Further, others already might have broken out and are getting support at their 10-week moving averages for the first time. And a few might be trading tightly near highs and refusing to give up much ground. Avoid extended stocks that are too far past proper entry points.

A call option is a bullish bet on a stock. Put options are bearish bets. One call option contract gives the holder the right to buy 100 shares of a stock at a specified price, known as the strike price.

Once you’ve identified a bullish setup in the earnings calendar, check strike prices with your online trading platform, or at Cboe.com. Also, make sure the option is liquid with a relatively tight spread between the bid and ask.

Look for a strike price just above the underlying stock price — that’s out of the money — and check the premium. Ideally, the premium should not exceed 4% of the underlying stock price at the time. In some cases, an in-the-money strike price is OK as long as the premium isn’t too expensive.

Choose an expiration date that fits your risk objective. But keep in mind that time is money in the options market. Near-term expiration dates will have cheaper premiums than those further out. Buying time in the options market comes at a higher cost.

Earnings Calendar Option Trade

With JPMorgan consolidating just below its 10-week line, an option trade was reasonably priced.

When the stock traded around 205, a slightly out-of-the-money weekly call option with a 207.50 strike price and an Oct. 18 expiration came with a premium of around $3.65 per contract. That was 1.8% of the underlying stock price at the time, a fairly cheap trade and well below the 4% threshold of IBD’s strategy.

One contract gave the holder the right to buy 100 shares of JPMorgan at 207.50 per share. The most that could be lost was $365 — the amount paid for the 100-share contract. To break even, JPM stock would need to rise to 211.15, factoring in the premium paid.

The expected move in the options market for JPMorgan, based on the at-the-money strike price of 202.50, was about nine points up or down. This was determined by adding the at-the-money call premium along with the put premium for the Oct. 11 contract.

Follow Ken Shreve on X/Twitter @IBD_KShreve for more stock market analysis and insight.

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