Financial services companies benefit in an environment of rising interest rates. As the Federal Reserve of the United States announced a faster tapering and tightening conditions, financial stocks outperformed.

Image: VantagePointTrading

The earnings season begins this month, with some of the biggest names in the sector reporting their quarterly earnings. In early January, here are three stocks to buy: JPMorgan, Citigroup, and BlackRock.

JPMorgan

JPMorgan (JPM) reports its quarterly earnings on January 14. The financial services company's stock delivered a double-digit performance in the last twelve months, on the back of the Fed speeding up tapering on the path to liftoff. Moreover, yields push higher in a tightening cycle, and thus investors favor financial stocks.

This is a dividend-paying company with a dividend growth history of 8 years. Moreover, the forward dividend yield is 2.47%, and the dividend payout ratio is 26.89%.

Valuation looks attractive at the start of the trading year, at least if we judge by the P/E Non-GAAP (TTM) ratio of 10.56, much lower than the 11.24 sector median. For the Q4 FY2021, JPMorgan is expected to deliver EPS of $2.96 and the annual revenue estimate for the fiscal period ending December 2021 is $122.60 billion.

Citigroup

Citigroup's (C) stock price underperformed in the last twelve months, affected by investors' willingness to invest in riskier assets as the financial conditions remained loose for most of the year. As such, Citi's stock price is down more than 2% in the last twelve months.

But the decline made the stock even more interesting because it improved its valuation. For instance, Citigroup trades at a P/E Non-GAAP (TTM) ratio much lower than the sector median by close to 50%.

Moreover, the forward dividend yield is 3.23%, and the company increased the dividend in the last 5 years by 37.18%.

BlackRock

BlackRock's (BLK) shares outperformed during the second year of the COVID-19 pandemic. They delivered 26.89% in the last twelve months and the valuation exceeds the sector's median by more than 100%.

This is a company operating with a gross profit margin for the past twelve months of 50.82% and it is reporting its quarterly earnings on January 14. Investors expect EPS of $10.04 on the quarter and BlackRock has delivered better than expected results for the past 9 consecutive quarters.