Home Most Popular Steer Clear: 5 Companies in Choppy Waters Following Jamie Dimon’s Cautionary Economic Notice

Steer Clear: 5 Companies in Choppy Waters Following Jamie Dimon’s Cautionary Economic Notice

0
Steer Clear: 5 Companies in Choppy Waters Following Jamie Dimon’s Cautionary Economic Notice

No time for lofty excitement as U.S. equity markets teeter near record highs, a delicate balancing act instigated by a select few tech behemoths. These tumultuous times are peppered with hurdles: formidable interest rates, soaring inflation rates, restrained consumer spending, geopolitical frictions, and more.

Recently, Jamie Dimon, the pragmatic CEO of JPMorgan Chase (JPM), threw a bucket of cold water on the euphoria. Dimon alertly cautioned about the precarious situation of commercial real estate companies, alongside regional banks, particularly if interest rates linger above expectations. Initially anticipated to slash rates imminently, the current sentiment among 55% on the CME FedWatch Tool suggests a feeble 55% majority postulating a rate cut as early as June 2024.

In a trenchant observation shared in an interview with CNBC, Dimon forcefully pointed out, “The market assumes a gentle landing. A plausible scenario, perhaps. Yet the market’s probabilities stand at 70 to 80 percent. I beg to differ; halve that, at best.”

Here are five stocks that might smack investors in the face, as Jamie Dimon heralds a stormy economic forecast.

1. Vornado Realty Trust Stock: A Ship Struggling to Stay Afloat

Vornado Realty Trust (VNO), valued at a hefty $5 billion market cap, wallows in dire straits. The real estate investment trust (REIT) parades a mosaic of properties across New York, Chicago, and San Francisco. However, the pandemic-fueled maelstrom and the relentless upsurge in interest rates over the past four years have left VNO capsizing, with shares plummeting a gut-wrenching 75% from soaring peaks.

Although VNO generously doled out $400 million in dividends to shareholders during 2022, the tune changed drastically in 2023. The beleaguered company, crippled by a frail financial structure and shrinking profit margins, found itself hobbling and was compelled to annul dividend payouts.

www.barchart.com

2. SL Green Realty Corp Stock: Weathering the Storm of Remote Work Trends

Another REIT, SL Green Realty (SLG), dons the mantle of acquiring, developing, owning, managing, and operating commercial real estate properties. The persistent specter of remote work, an enduring legacy of the pandemic, haunts SL Green Realty and its counterparts. Seismic shifts in work habits led to escalating vacancy rates, impairing SL Green Realty and its peers in recent memory.

SL Green plays custodian to a constellation of 30 buildings, spanning a colossal 33.1 million square feet of leasable territory. However, the once-rock-solid occupancy rates, once perched above 94% in 2019, now sag below 90% in 2023. This slump translates to dwindling fund flows and bottom-line earnings.

3. Regions Financial Stock: Riding the Choppy Waters of Economic Uncertainty

Regions Financial (RF), a stalwart valued at $17.1 billion by market cap, occupies a throne among mid-sized U.S. banks. Trading a humbling 51% beneath its historical peaks, the bank stock dangles a tantalizing dividend yield exceeding 5%. Alas, the robust regional lender tripped over earnings estimates in three out of four recent quarters, marred by a misty macroeconomic backdrop.

The ferocious jaws of higher deposit and funding costs gnaw relentlessly at profit margins, a vexatious trend poised to extend in the immediate future. Analysts dust off their crystal balls, foreseeing a gloomy earnings trajectory dwindling from $2.24 per share in 2023 to a meager $1.98 per share in 2024.

www.barchart.com

4. Cullen/Frost Bankers Stock: A Titanic Battling the Tides

Cullen/Frost Bankers (CFR), another regional bank, stumbled in its Q4 financial narrative, clocking $100.9 million, or $1.55 per share, against $189.5 million, or $2.91 per share, in a previous year. Scrutinizing the fine print unveils an adjusted earning of $2.18 per share.

The stinging blow of an FDIC insurance surcharge worth $51.5 million, tied to early 2023 bank failures, reverberates in CFR’s results. The return on equity nosedived to a feeble 13.5% in Q4 from a robust 27.16% in the corresponding period of 2022.

Despite defiantly brandishing its well-padded coffers, CFR stares down a bleak barrel, with forecasts pointing to a tailspin in earnings from $9.73 per share in 2023 to a paltry $8.45 per share in 2024.

5. Commerce Bancshares Stock: Navigating Murky Waters

Bringing up the rear is Commerce Bancshares (CBSH), reporting a disheartening Q4 performance of $0.84 per share, amounting to $109.2 million, a dip from $1 per share, or $131.6 million, in the year-prior period. Priced at a hefty 17 times forward earnings, the stock doesn’t come cheap, facing a projected squeeze in earnings from $3.64 per share in 2023 to a thin $3.24 per share in 2024.

Paralleling its financial kin in the banking universe, Commerce Bancshares stares at the abyss, especially if the economic terrain grows more rugged, potentially ushering in spiked delinquency rates and increased credit loss provisions.

www.barchart.com

On the day of penning this piece, Aditya Raghunath did not boast any position, be it direct or indirect, in any of the securities cited in this article. The information and data enclosed herein rests purely for enlightenment purposes.

The musings and viewpoints articulated herein belong to the author’s realm and diverge from Nasdaq, Inc.’