Another bank, another earnings beat. JPMorgan Chase (JPM) reported better-than-expected earnings results on Thursday, posting profits of 40 cents a share. That news followed a preliminary earnings announcement last week from Wells Fargo (WFC) that revealed it will probably post a record quarterly profit of $3 billion later this month.

Chase s 40 cents a share was down from 67 cents a share last year but in excess of the average Wall Street analyst estimate of 32 cents a share. Its earnings, coupled with the Wells Fargo news, are bolstering a growing sense that expectations for the bank sector have drifted a little too low. That's abetted by the government's generally positive assessment of its so-called stress tests, which evaluate the financial health of major financial institutions in scenarios that include a deepening severe recession.

While revenue slid 10% largely on higher costs for its credit card and retail services divisions, CEO Jamie Dimon said the bank is ready to move away from the additional government oversight foisted upon it when it accepted about $25 billion from the Troubled Asset Relief Program or TARP. Our position, he said in a Thursday conference call, "is we would like to repay it as soon as possible."

Despite beating estimates, the stocks moved just 1% during early trading. The mild move has more to do with an adjustment in investors' perceptions of the financial sector and J.P. Morgan's ability to radiate relative confidence in the midst of the market meltdown.

Also, veteran bank analyst Dick Bove wrote that it's still doing pretty good business.

"JPMorgan Chase is clearly not insolvent. Its assets are well above its liabilities and the net difference is at record levels," he wrote. "For one to argue this company is insolvent, one must argue that the company, the multiple regulators and the auditors who analyze this company s books know far less than the outsiders who have never seen these books or that the insiders are simply dishonest. Of course, this latter argument is now conventional wisdom, but it makes little sense to me."

Bottom Line: Buy
A playing field that's less crowded and solid operating success means JPMorgan can survive the recession and emerge strong.

Rosetta Stone Goes Public, Increases

Rosetta Stone (RST) launched a successful initial public offering on Thursday, a rare event in a dismal market.

The Arlington, Va.-based maker of language instruction software on Wednesday priced its IPO at $18 a share, opened at $23 a share and saw a spike as high as $25.79, a 43% pop. It recorded 53% revenue growth last year to reach $209.4 million. The recent scarcity of IPOs in a bear market opened the door to investor enthusiasm, but that doesn't mean a flood of new offerings are coming.

The company cited a quiet period in offering no further comment, but said Morgan Stanley (MS) and William Blair & Co. acted as joint book-running managers for the offering. Jefferies (JEF), Piper Jaffray (PJC) and Robert W. Baird & Co. co-managed it.

Rosetta Stone is a well-established company founded in 1991 as Fairfield Language Technologies, and its track record gives it a chance to thrive as a public company, says Scott Sweet, senior managing partner at IPOBoutique.com in Tampa.

"Rosetta is very organic, and had very unique, profitable top line revenue growth and no debt," he says. "Rosetta [is] the first pure play in its sector to go public, so it's tough to predict performance by comparison with other stocks. However, I expect the offering to draw energy from the current strength of education stocks."

Bottom Line Hold
Small investors never get the biggest pop on an IPO, but it's worth waiting for the price to ebb.

Paint Maker Up on Earnings

Investors bought shares of Sherwin-Williams (SHW) after the Cleveland paint maker reported better-than-expected earnings and offered a glossier outlook on the current quarter.

The company posted earnings of 32 cents a share, a 52% drop in profit from a year ago, and also cut its full-year sales estimates. However, it kept its second-quarter earnings projections at $1.20 to $1.45 a share while Wall Street analysts expected $1.20 a share. It said sales for that time period would decline 9% to 12% while analysts expected an 8% drop to $2.1 billion.

"We did in fact see a sharp drop in demand for paint and coatings in the second half of last year and we had no reason to expect that conditions would improve early this year," said chief executive officer Christopher Connor. "Nearly half of all resales in recent months were foreclosures and distress sales, which don't necessarily generate the same volume of repainting activity in the near term that we would typically associate with an owner occupant turnover."

Morningstar analyst Anthony Dayrit said the company's outlook for the year hasn't changed.

"Continued weakness in the residential sector may cause some of Sherwin-Williams' larger retail customers to scale back orders for the company's products, and the company may have trouble pushing price increases during a weak demand environment," he wrote in a preview note. "While we anticipate that the company will struggle in the short term, we remain positive about its long-term prospects."

Bottom Line: Hold
There will be some uneven coating here, and a lower entry point is better for a recovery-linked rise in share prices.