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Is a Surprise Likely for SunTrust (STI) in Q4 Earnings?
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We expect SunTrust Banks, Inc. (STI - Free Report) to beat earnings expectations when it reports fourth-quarter and full-year 2016 results on Jan 20, before the opening bell.
Driven by a rise in revenues, SunTrust’s earnings had surpassed the Zacks Consensus Estimate in the third quarter. However, an increase in provision for credit losses and an escalation in operating expenses were the downsides.
The earnings beat translated into improved stock price movement, as the company’s shares were up over 25.2%, for the three-month period ended Dec 31, 2016. Notably, analysts seem to be optimistic about SunTrust’s business activities and prospects. As a result, the Zacks Consensus Estimate of 88 cents for the just concluded quarter improved 1.1% over the last 30 days.
Additionally, SunTrust boasts a decent earnings surprise history, as evident from the chart below:
Before we go into a detailed discussion about the factors that are likely to influence the results, let’s check what our quantitative model predicts.
According to our quantitative model, the chances of SunTrust beating the Zacks Consensus Estimate in the fourth quarter are very high. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #3 (Hold) or better for this to happen.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP: The Earnings ESP for SunTrust is +2.27%. This is because the Most Accurate estimate of 90 cents is higher than the Zacks Consensus Estimate, which stands at 88 cents.
Zacks Rank: SunTrust currently carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP and makes us reasonably confident of an earnings beat in the upcoming release.
Factors to Influence Q4 Results
Let us see how things have shaped up for SunTrust for this announcement.
Loan Growth to Drive Interest Income: With improving domestic economy, demand for loans is on the rise. Moreover, expectations of higher interest rates and reduced legislations should further lead to a rise in loans in the quarter. As a result, we believe that net interest income (NII) for SunTrust in the fourth quarter should improve, supported by loan growth.
Non-Interest Income Might Improve Marginally: Despite seasonal weakness in mortgage banking, improved capital market activity and higher wealth management income should positively impact fee income growth in the quarter. Moreover, management is of the opinion that mortgage production income in the fourth quarter might improve year over year, driven by the positive momentum in pipelines and application activity. Further, the company expects investment banking fees to improve in the fourth quarter on year over year basis.
Margin Pressure Might Ease a Little: Management expects net interest margin (NIM) to decline 2–3 bps in fourth quarter, triggered by lower new production yields and higher expenses arising from the creation of the company’s securities portfolio.
However, we believe that a steeper yield curve in the quarter will have a positive impact on margins. Also, treasury yields in the fourth quarter have increased, thereby widening the yield spreads. This in turn is likely to ease some of the margin pressure in the quarter.
Credit Quality to Support Results: Although expectations of increased loan growth will likely lead to a rise in provisions in the quarter, we believe that this will be partly offset by a fall in energy-led provisions as oil prices have been rising off late. Hence, overall credit quality is anticipated to reflect improvement in the upcoming release.
Expenses Likely to Rise: As a result of FDIC’s new surcharge, assessment costs in the fourth quarter are projected to increase an additional $10 million. Nevertheless, the company remains undeterred in its efforts to improve efficiency.
Other Stocks That Warrant a Look
Here are a few other finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming announcements.
Fifth Third Bancorp (FITB - Free Report) another Zacks Rank #2 stock, has an Earnings ESP of +2.33%. It is slated to release results on Jan 24.
T. Rowe Price Group, Inc. (TROW - Free Report) carries a Zacks Rank #3 and has an Earnings ESP of +3.68%. It is scheduled to report results on Jan 26.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
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Is a Surprise Likely for SunTrust (STI) in Q4 Earnings?
We expect SunTrust Banks, Inc. (STI - Free Report) to beat earnings expectations when it reports fourth-quarter and full-year 2016 results on Jan 20, before the opening bell.
Driven by a rise in revenues, SunTrust’s earnings had surpassed the Zacks Consensus Estimate in the third quarter. However, an increase in provision for credit losses and an escalation in operating expenses were the downsides.
The earnings beat translated into improved stock price movement, as the company’s shares were up over 25.2%, for the three-month period ended Dec 31, 2016. Notably, analysts seem to be optimistic about SunTrust’s business activities and prospects. As a result, the Zacks Consensus Estimate of 88 cents for the just concluded quarter improved 1.1% over the last 30 days.
Additionally, SunTrust boasts a decent earnings surprise history, as evident from the chart below:
SunTrust Banks Inc. Price and EPS Surprise
SunTrust Banks Inc. Price and EPS Surprise | SunTrust Banks Inc. Quote
Why a Likely Positive Surprise?
Before we go into a detailed discussion about the factors that are likely to influence the results, let’s check what our quantitative model predicts.
According to our quantitative model, the chances of SunTrust beating the Zacks Consensus Estimate in the fourth quarter are very high. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #3 (Hold) or better for this to happen.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP: The Earnings ESP for SunTrust is +2.27%. This is because the Most Accurate estimate of 90 cents is higher than the Zacks Consensus Estimate, which stands at 88 cents.
Zacks Rank: SunTrust currently carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP and makes us reasonably confident of an earnings beat in the upcoming release.
Factors to Influence Q4 Results
Let us see how things have shaped up for SunTrust for this announcement.
Loan Growth to Drive Interest Income: With improving domestic economy, demand for loans is on the rise. Moreover, expectations of higher interest rates and reduced legislations should further lead to a rise in loans in the quarter. As a result, we believe that net interest income (NII) for SunTrust in the fourth quarter should improve, supported by loan growth.
Non-Interest Income Might Improve Marginally: Despite seasonal weakness in mortgage banking, improved capital market activity and higher wealth management income should positively impact fee income growth in the quarter. Moreover, management is of the opinion that mortgage production income in the fourth quarter might improve year over year, driven by the positive momentum in pipelines and application activity. Further, the company expects investment banking fees to improve in the fourth quarter on year over year basis.
Margin Pressure Might Ease a Little: Management expects net interest margin (NIM) to decline 2–3 bps in fourth quarter, triggered by lower new production yields and higher expenses arising from the creation of the company’s securities portfolio.
However, we believe that a steeper yield curve in the quarter will have a positive impact on margins. Also, treasury yields in the fourth quarter have increased, thereby widening the yield spreads. This in turn is likely to ease some of the margin pressure in the quarter.
Credit Quality to Support Results: Although expectations of increased loan growth will likely lead to a rise in provisions in the quarter, we believe that this will be partly offset by a fall in energy-led provisions as oil prices have been rising off late. Hence, overall credit quality is anticipated to reflect improvement in the upcoming release.
Expenses Likely to Rise: As a result of FDIC’s new surcharge, assessment costs in the fourth quarter are projected to increase an additional $10 million. Nevertheless, the company remains undeterred in its efforts to improve efficiency.
Other Stocks That Warrant a Look
Here are a few other finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming announcements.
Citizens Financial Group, Inc. (CFG - Free Report) is slated to release results on Jan 20. It has an Earnings ESP of +3.85% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Fifth Third Bancorp (FITB - Free Report) another Zacks Rank #2 stock, has an Earnings ESP of +2.33%. It is slated to release results on Jan 24.
T. Rowe Price Group, Inc. (TROW - Free Report) carries a Zacks Rank #3 and has an Earnings ESP of +3.68%. It is scheduled to report results on Jan 26.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>