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What's in Store for Huntington (HBAN) in Q3 Earnings?
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Huntington Bancshares Incorporated (HBAN - Free Report) is scheduled to report third-quarter 2016 results on Wednesday, Oct 26, before the market opens.
The Columbus, OH-based bank’s second-quarter 2016 earnings were in line with the Zacks Consensus Estimate. Results displayed growth in revenues. Also, the quarter witnessed continual growth in both loan and deposit balances along with a strong capital position. However, elevated expenses and higher provision for credit losses were the headwinds.
Will consistently increasing expenses dampen Huntington’s third-quarter results? Will growth in revenues be able to offset expense pressure? Let’s see how things have shaped up prior to this announcement.
Huntington recorded an average negative surprise of 1.31% over the trailing four quarters.
Revenues to Grow: Revenues are expected to grow, consistent with the company’s long-term financial goals, despite the low rate environment. However, this anticipated growth excludes the effects of the net Mortgage Servicing Rights (MSR) activity and the incremental impact of the First Merit acquisition which is likely to impact the company’s financials in 2017. However, during the quarter, non-interest income is likely to fall due to the sale of Huntington Asset Advisors, Huntington Asset Services and Unified Financial Services.
Credit Quality to Normalize: Overall, credit quality is expected to remain at the current levels. However, in the quarter, moderate volatility can be recorded given the reduction in problem assets and credit costs and volatility in commodities and currency market. Notably, the loan loss provisions are expected to gradually normalize and net charge-offs are likely to remain below the long-term target range of 35–55 basis points.
NIM to Remain Under Pressure: It is expected that the net interest margin (NIM) will remain under pressure during the third quarter, based on the assumption of no rise in interest rates during the year. However, it is likely to continue its second-quarter trend and stay above the 3% level.
Expenses to Rise: Though management remains focused on expense management, we remain apprehensive, given the company’s continued investments in the business and hence expect expenses to rise. Notably, though the sale of Huntington Asset Advisors, Huntington Asset Services and Unified Financial Services are expected to lower expenses, the recently announced FDIC surcharge is likely to drive FDIC insurance expenses higher.
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 third 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 0.00%. This is because the Most Accurate estimate of 21 cents is in-line with the Zacks Consensus Estimate.
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.
Ally Financial Inc. (ALLY - Free Report) has an Earnings ESP of +1.70% and carries a Zacks Rank #3. It is also scheduled to report third-quarter results on Oct 26.
The Earnings ESP for Franklin Resources, Inc. (BEN - Free Report) is +1.45% and it carries a Zacks Rank #3. The company is expected to release its fourth-quarter fiscal 2016 (ended Sep 30) results on Oct 26.
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What's in Store for Huntington (HBAN) in Q3 Earnings?
Huntington Bancshares Incorporated (HBAN - Free Report) is scheduled to report third-quarter 2016 results on Wednesday, Oct 26, before the market opens.
The Columbus, OH-based bank’s second-quarter 2016 earnings were in line with the Zacks Consensus Estimate. Results displayed growth in revenues. Also, the quarter witnessed continual growth in both loan and deposit balances along with a strong capital position. However, elevated expenses and higher provision for credit losses were the headwinds.
Will consistently increasing expenses dampen Huntington’s third-quarter results? Will growth in revenues be able to offset expense pressure? Let’s see how things have shaped up prior to this announcement.
Huntington recorded an average negative surprise of 1.31% over the trailing four quarters.
HUNTINGTON BANC Price and EPS Surprise
HUNTINGTON BANC Price and EPS Surprise | HUNTINGTON BANC Quote
Factors to Influence Q3 Results
Revenues to Grow: Revenues are expected to grow, consistent with the company’s long-term financial goals, despite the low rate environment. However, this anticipated growth excludes the effects of the net Mortgage Servicing Rights (MSR) activity and the incremental impact of the First Merit acquisition which is likely to impact the company’s financials in 2017. However, during the quarter, non-interest income is likely to fall due to the sale of Huntington Asset Advisors, Huntington Asset Services and Unified Financial Services.
Credit Quality to Normalize: Overall, credit quality is expected to remain at the current levels. However, in the quarter, moderate volatility can be recorded given the reduction in problem assets and credit costs and volatility in commodities and currency market. Notably, the loan loss provisions are expected to gradually normalize and net charge-offs are likely to remain below the long-term target range of 35–55 basis points.
NIM to Remain Under Pressure: It is expected that the net interest margin (NIM) will remain under pressure during the third quarter, based on the assumption of no rise in interest rates during the year. However, it is likely to continue its second-quarter trend and stay above the 3% level.
Expenses to Rise: Though management remains focused on expense management, we remain apprehensive, given the company’s continued investments in the business and hence expect expenses to rise. Notably, though the sale of Huntington Asset Advisors, Huntington Asset Services and Unified Financial Services are expected to lower expenses, the recently announced FDIC surcharge is likely to drive FDIC insurance expenses higher.
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 third 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 0.00%. This is because the Most Accurate estimate of 21 cents is in-line with the Zacks Consensus Estimate.
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.
State Street Corporation (STT - Free Report) is slated to report its third-quarter results on Oct 26. It has an Earnings ESP of +0.80% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ally Financial Inc. (ALLY - Free Report) has an Earnings ESP of +1.70% and carries a Zacks Rank #3. It is also scheduled to report third-quarter results on Oct 26.
The Earnings ESP for Franklin Resources, Inc. (BEN - Free Report) is +1.45% and it carries a Zacks Rank #3. The company is expected to release its fourth-quarter fiscal 2016 (ended Sep 30) results on Oct 26.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>.