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Will Citizens Financial (CFG) Stock Tank Post-Q2 Earnings?
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Citizens Financial Group, Inc.’s (CFG - Free Report) earnings estimates have been going down ahead of its second-quarter earnings release on Thursday, Jul 21. Could it be that this time around Citizens Financial will disappoint investors and market-watchers with lackluster results?
The Providence, Rhode Island-based company beat the Zacks Consensus Estimate by nearly 8% in the first-quarter 2016. Also, on an adjusted basis, the bottom line improved 5% year over year aided by higher net-interest income and relatively stable expenses, partially offset by a fall in non-interest income and a significant rise in provisions.
Interestingly, Citizens Financial delivered positive earnings surprises in three of the trailing four quarters with an average earnings beat of 4.64%. However, from the start of the year, it has been a tough environment for U.S. banks to function in with industry-wide weakness and global concerns, not the least of which was the Brexit referendum taking a toll on the bank stocks, with Citizens Financial falling around 20% year to date.
Will the upcoming earnings release put further pressure on Citizens Financial stock? It majorly depends to what extent the company has been able to boost its performance. Notably, our quantitative model doesn’t call for an earnings beat this time around. Here's why:
A stock needs to have the right combination of the two key criteria – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) – for increasing the chances of an earnings beat. Unfortunately, this is not the case here, as elaborated below.
Zacks ESP: The Earnings ESP for Citizens Financial is 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate, both, stand at 43 cents.
Zacks Rank: Citizens Financial’s Zacks Rank #4 (Sell) further lowers the predictive power of ESP. We caution investors against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement.
The activities of Citizens Financial during the quarter have not been able to win analysts’ confidence as evident from the five downward revisions in earnings estimates (versus no upward revision) over the last 30 days. The Zacks Consensus Estimate has been revised 2.3% downward over the last one month.
What to Expect in Q2?
Muted growth in net interest income, margin pressure lingers: While management expects average loan growth of around 2% on a sequential basis, we do not expect significant improvement in net-interest income amid the still low rate environment. Further, the results should reflect continued pressure on net interest margin. (NIM). NIM was 2.86% during first-quarter 2016. Management expects NIM to be moderately stable at this level in the second quarter.
Increase in expenses: Management expects a modest rise in expense on a sequential basis as efficiency initiatives will be partially offset by continued investment spending. However, the company expects to generate positive operating leverage.
Provisions to trend high: Overall, the credits metrics are anticipated to remain almost stable. However, provisions are likely to increase moderately driven by quarterly incremental loan growth.
Fee income to exhibit strength: On a positive note, non-interest income might get a lift owing to Citizens Financial’s ongoing initiatives to boost its several capabilities. Notably, the company expects mid-single digit growth in non-interest income without any security gains. Service charges are likely to exhibit modest growth to reflect the benefit household growth, as well as the company’s treasury solutions pricing initiatives in both commercial and business banking. Further, the quarter should reflect seasonally higher mortgage banking revenue reflecting higher originations on the back of stronger purchase as well as refinance volumes.
Stocks That Warrant a Look
Here are some stocks worth considering, as according to our model they have the right combination of elements to post an earnings beat this quarter.
LPL Financial Holdings Inc. (LPLA - Free Report) , which is expected to report on Jul 28, has an Earnings ESP of +2.33% and a Zacks Rank #3.
Federated Investors, Inc. has an Earnings ESP of +2.13% and carries a Zacks Rank #3. It is scheduled to report results on Jul 28.
Cullen/Frost Bankers, Inc. (CFR - Free Report) has an Earnings ESP of +0.96% and carries a Zacks Rank #3. The company is expected to release results on Aug 3.
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Will Citizens Financial (CFG) Stock Tank Post-Q2 Earnings?
Citizens Financial Group, Inc.’s (CFG - Free Report) earnings estimates have been going down ahead of its second-quarter earnings release on Thursday, Jul 21. Could it be that this time around Citizens Financial will disappoint investors and market-watchers with lackluster results?
The Providence, Rhode Island-based company beat the Zacks Consensus Estimate by nearly 8% in the first-quarter 2016. Also, on an adjusted basis, the bottom line improved 5% year over year aided by higher net-interest income and relatively stable expenses, partially offset by a fall in non-interest income and a significant rise in provisions.
Interestingly, Citizens Financial delivered positive earnings surprises in three of the trailing four quarters with an average earnings beat of 4.64%. However, from the start of the year, it has been a tough environment for U.S. banks to function in with industry-wide weakness and global concerns, not the least of which was the Brexit referendum taking a toll on the bank stocks, with Citizens Financial falling around 20% year to date.
CITIZENS FIN GP Price and EPS Surprise
CITIZENS FIN GP Price and EPS Surprise | CITIZENS FIN GP Quote
Will the upcoming earnings release put further pressure on Citizens Financial stock? It majorly depends to what extent the company has been able to boost its performance. Notably, our quantitative model doesn’t call for an earnings beat this time around. Here's why:
A stock needs to have the right combination of the two key criteria – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) – for increasing the chances of an earnings beat. Unfortunately, this is not the case here, as elaborated below.
Zacks ESP: The Earnings ESP for Citizens Financial is 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate, both, stand at 43 cents.
Zacks Rank: Citizens Financial’s Zacks Rank #4 (Sell) further lowers the predictive power of ESP. We caution investors against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement.
The activities of Citizens Financial during the quarter have not been able to win analysts’ confidence as evident from the five downward revisions in earnings estimates (versus no upward revision) over the last 30 days. The Zacks Consensus Estimate has been revised 2.3% downward over the last one month.
What to Expect in Q2?
Muted growth in net interest income, margin pressure lingers: While management expects average loan growth of around 2% on a sequential basis, we do not expect significant improvement in net-interest income amid the still low rate environment. Further, the results should reflect continued pressure on net interest margin. (NIM). NIM was 2.86% during first-quarter 2016. Management expects NIM to be moderately stable at this level in the second quarter.
Increase in expenses: Management expects a modest rise in expense on a sequential basis as efficiency initiatives will be partially offset by continued investment spending. However, the company expects to generate positive operating leverage.
Provisions to trend high: Overall, the credits metrics are anticipated to remain almost stable. However, provisions are likely to increase moderately driven by quarterly incremental loan growth.
Fee income to exhibit strength: On a positive note, non-interest income might get a lift owing to Citizens Financial’s ongoing initiatives to boost its several capabilities. Notably, the company expects mid-single digit growth in non-interest income without any security gains. Service charges are likely to exhibit modest growth to reflect the benefit household growth, as well as the company’s treasury solutions pricing initiatives in both commercial and business banking. Further, the quarter should reflect seasonally higher mortgage banking revenue reflecting higher originations on the back of stronger purchase as well as refinance volumes.
Stocks That Warrant a Look
Here are some stocks worth considering, as according to our model they have the right combination of elements to post an earnings beat this quarter.
LPL Financial Holdings Inc. (LPLA - Free Report) , which is expected to report on Jul 28, has an Earnings ESP of +2.33% and a Zacks Rank #3.
Federated Investors, Inc. has an Earnings ESP of +2.13% and carries a Zacks Rank #3. It is scheduled to report results on Jul 28.
Cullen/Frost Bankers, Inc. (CFR - Free Report) has an Earnings ESP of +0.96% and carries a Zacks Rank #3. The company is expected to release results on Aug 3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>