Weekly Wrap: Banks Kick Off Earnings, United Shares Grounded

Jeremy Glaser: Banks kick off earnings season. Is the damage to United's brand permanent? A trucking merger, and Qualcomm still looks attractive. This time on the Morningstar Weekly Wrap.

JPMorgan, Wells Fargo, and Citi all reported results on Thursday. Analyst Jim Sinegal gives his take and where he sees value today.

Jim Sinegal: There's been some divergence in first-quarter banking results. What we've seen is that it was a great quarter for investment banking. JPMorgan did very well. Citigroup did very well. Retail banking was a bit of another story, especially for Wells Fargo, which has had some problems over the past few months. We've seen some customers perhaps defecting from Wells--account closures were up slightly from the previous month. Sales activity was down, and we've actually seen a little bit of shakiness in consumer credit. Auto loans have been an area of concern for a number of months now. We're starting to see that come through in results. Slightly higher losses--Wells in particular is pulling back on underwriting--so, a bit of worry around the consumer side of things.

That said, things for the banks look very good overall. The rising interest-rate environment is helping, although there was a pause in first-quarter corporate credit demand. It looks like businesses are optimistic going forward, and we see some value in a couple of names.

Glaser: United spent the week trying to find its footing after forcibly removing a passenger from the plane last weekend. Analyst Chris Higgins shows what he thinks it means for long-term investors.

Chris Higgins: Well there's no doubt that United Airlines has a PR crisis on its hands. We think for long-term investors, there's not a significant or material impact from this incident. If you're looking to hold United stock for two, three years out, we don't see financial or operational performance being impacted by this incident. However, over the six to nine months, we may see some headwinds in terms of United's demand, particularly in the Asia-Pacific region where it's trying to expand market share.

Glaser: Trucking firms Knight and Swift agreed to a merger this week that Morningstar's Matthew Young thinks will be good for shareholders of both firms.

Matthew Young: At the end of the day, Knight's shareholders will control about 46% of the new entity while Swift shareholders will control about 54%. Based on our DCF-derived estimate on the equity value of the new Knight-Swift enterprise, we raised our fair value for Knight by about a little over 10% and Swift by a little over 20%. And most of the upside there relates to the structure of the deal as well as our belief that Knight can take its best-in-class operating capabilities and take Swift's margin up to its level of performance, which is one of the best in the industry.

Glaser: Qualcomm will have to refund Blackberry over $814 million in royalties, but analyst Abhinav Davuluri sees shares as attractive today.

Abhinav Davuluri: With Blackberry having sunset its hardware business, the issue at hand is not whether Qualcomm is entitled to collect royalties, but more so on royalties for devices that were never actually sold. We don't see a particular read-through for Qualcomm's ongoing legal issues in South Korea, the U.S., and with Apple, despite shares having reacted negatively. With shares firmly entrenched in 4-star territory, we continue to see an appropriate margin of safety in this narrow-moat name.

Glaser: And in case you missed it on the Morningstar this week, Charles Gross and Brian Bernard explain why we're still bullish on a continued housing recovery.