2 Banking Majors Set to Beat Earnings Estimates
Standing out as the most liquid market in the world, the U.S. financial sector promises high growth and reduced unemployment on increased economic activity. The industry also offers an array of financial instruments and products for managing risk, creating wealth and meeting financial needs.
As a broader part of the financial sector, major U.S. banks draw maximum attention. Ahead of their first-quarter 2014 results, these banks are building up speculations about their performance after a tough backdrop endured since the beginning of the year. The quarter was challenged by slow consumer and corporate activities, soft trading volumes, sluggish mortgage banking activities, and steep legal costs.
Moreover, lack of significant loan growth (primarily the home equity lines of credit) has impacted top-line and net interest margins which were hurt by a nagging low rate environment. However, banks have been gradually moderating their lending standards and trending toward higher fees to evade the pressure on the top line.
Overall, the major banks remain under pressure with respect to earnings. So far, these banks are expected to report 6.8% earnings decline in the first quarter of 2014.
(For a detailed look at the earnings outlook for the Finance sector and others, please read our Earnings Outlook report.)
While the dreary first quarter backdrop is likely to be reflected in the results of the U.S. banking biggies, we can also expect signs of resilience and improvement in their performances. So this is perhaps the right time to add some major banking stocks that are poised to beat earnings in their upcoming announcement.
The Way to Pick Right Stocks
Picking the most rewarding stocks within the industry might be a difficult task unless one knows the tactic to narrow down the list. One way to do that is by choosing stocks that have the combination of a favorable Zacks Rank – Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) – and a positive Zacks Earnings ESP.
Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising with their upcoming earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
Here are 2 major banking stocks that have the right combination of elements to deliver earnings surprises in their upcoming announcements.
The PNC Financial Services Group, Inc. (PNC - Analyst Report) is a Zacks Rank #3 stock with an earnings ESP of +2.41%. The Zacks Consensus Estimate for the first quarter 2014 is $1.66 per share.
Headquartered in Pittsburgh, PA, PNC Financial is a diversified financial services provider. The company provides retail banking services, corporate & institutional banking services and wealth management products among others.
The company has registered an average positive earnings surprise of 11.9% over the trailing four quarters.
- PNC Financial is scheduled to announce its first-quarter 2014 results before the opening bell on Apr 16.
BankUnited, Inc. (BKU - Analyst Report) carries a Zacks Rank #2 and has an earnings ESP of +6.82%. The Zacks Consensus Estimate for the first quarter is 44 cents per share.
Based in Miami Lakes, FL, BankUnited is a provider of various banking products and services to commercial and middle-market businesses, and individual customers in the United States.
The company has recorded an average positive earnings surprise of 11.78% over the trailing four quarters.
- BankUnited is expected to announce its first-quarter 2014 results before the opening bell on Apr 23.
Despite an expected 6.8% decline in total earnings, investors have to be patient from a long-term investment perspective. Further, a favorable equity and asset market backdrop, and encouraging macroeconomic factors – such as falling unemployment, a progressive housing sector and flexible monetary policy – should pave way for stability.
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Read the analyst report on PNC
Read the analyst report on BKU
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