Huntington Bancshares Incorporated (HBAN Quick QuoteHBAN - Free Report) is unlikely to beat earnings expectations when it reports second-quarter 2016 results, before the opening bell on Thursday, Jul 21.

The Columbus, OH-based bank’s first-quarter 2016 earnings were in line with the Zacks Consensus Estimate, though it exceeded the prior-year quarter earnings. Results displayed growth in net interest income as well as non-interest income. However, the quarter recorded elevated expenses and higher provision for credit losses.

Will consistently increasing cost base pose a headwind before Huntington’s second-quarter performance? Or will top-line growth mitigate an earnings disappointment? Let’s see how things have shaped up prior to this announcement.

Huntington has recorded an average positive surprise of 2.44% for the trailing four quarters as depicted in the chart below:

HUNTINGTON BANC Price and EPS Surprise

HUNTINGTON BANC Price and EPS Surprise | HUNTINGTON BANC Quote

Factors to Influence Q2 Results

Expenses to Escalate: We believe higher expenses will act as a dampener for Huntington’s upcoming results. Though management remains focused on expense management, we remain apprehensive, given the company’s continued investments in the business.

Fee Income Under Pressure: The company’s fee income is likely to be impacted as it sold of its businesses – Huntington Asset Advisors, Huntington Asset Services, and Unified Financial Services.

Net Interest Income Trend to Continue: We expect an improved net interest income (NII) which has shown a steady rise over the last few quarters. The uptrend in NII is likely to continue in the second quarter too, driven by appreciable growth in loans, primarily in commercial and industrial along with commercial real estate as well. Yet, net interest margin is expected to be under strain, based on the probability of no rise in interest rates during the year.

Credit Quality to Normalize: Overall, credit quality is expected to remain at the current levels. However, given the reduction in problem assets and credit costs, moderate volatility in the quarter can be recorded.

Activities of Huntington during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter remained stable at 21 cents per share over the last seven days.

Earnings Whispers

Our proven model does not conclusively show that Huntington is likely to beat the Zacks Consensus Estimate in the second quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP:  The Earnings ESP for Huntington is -4.76%. This is because the Most Accurate estimate of 20 cents is lower than the Zacks Consensus Estimate of 21 cents.

Zacks Rank: Though Huntington’s Zacks Rank #3 increases the predictive power of ESP, we also need to have a positive ESP to be confident of an earnings surprise.

Stocks That Warrant a Look

Here are some stocks you may want to consider, as according to our proven model they have the right combination of elements to post an earnings beat this quarter.

Hancock Holding Co. has an earnings ESP of +4.55% and carries a Zacks Rank #3. It is scheduled to report its second-quarter results on Jul 20.

The earnings ESP for Cullen/Frost Bankers, Inc. (CFR Quick QuoteCFR - Free Report) is +0.96% and it carries a Zacks Rank #3. The company is expected to release its second-quarter results on Aug 3.

Federated Investors, Inc. has an earnings ESP of +2.13% and carries a Zacks Rank #3. It is slated to report its second-quarter results on Jul 28.

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