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BofA (BAC) Q1 Earnings: What's in the Cards for the Stock?
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Bank of America Corp. (BAC - Free Report) is slated to release first-quarter 2017 results on Tuesday, Apr 18, before the opening bell. Notably, of late, the company’s quarterly earnings estimates have been relatively stable. So, what to expect from the company in the upcoming earnings release?
Last quarter, improved fixed income and equity trading revenues, a rise in mortgage banking income, efficient expense control and fall in provisions helped BofA to surpass the Zacks Consensus Estimate. However, these were partially offset by lower investment banking fees.
The earnings beat along with growing optimism surrounding improvement in the operating backdrop translated into enhanced share price movement. For the three months ended Mar 31, BofA stock increased 4.7%. Further, BofA has a decent surprise history, as evident from the chart below:
Bank of America Corporation Price and EPS Surprise
Trading Revenues Should Improve: Ambiguity related to Trump's policy changes is expected to lead to better trading activities. Hence, trading revenues are projected to increase, driven by the strength in equity as well as fixed income and currencies.
Modest Increase in Net Interest Income (NII) Likely: Slowdown in loan growth during the quarter due to uncertainty over Trump’s policy goals and cheaper ways to borrow might have led to marginal NII growth, despite a rise in interest rates.
Notably, management expects NII to increase $600 million despite two less days in the quarter based on expectations of interest rates remaining stable as well as modest loan and deposit growth.
Investment Banking Might have Helped: During the quarter, M&A activities were robust while equity and debt underwriting increased. Per the Thomson Reuters data, BofA is likely to record a year-over-year increase in investment banking fees in the quarter.
Mortgage Revenues Likely to Grow: An expected higher rate environment and less-concerned lenders over regulatory restrictions drove demand for refinancing during the quarter. This might have helped BofA generate decent mortgage revenues.
Costs Might have Risen Marginally: Similar to the past years, management should have incurred nearly $1.3 billion for retirement eligible incentives and seasonally elevated payroll tax expense during the quarter. Also, with a rebound in capital markets based activity, the company should have recorded related increase in expenses.
Nonetheless, in the absence of additional legal costs and provisions, overall operating expenses should have been stable in the quarter, given the success of BofA’s cost-saving efforts and other restructuring initiatives.
Earnings Whispers
Chances of BofA beating the Zacks Consensus Estimate in the first quarter are less. That 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 increasing chances of an earnings beat.
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 BofA is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 35 cents.
Zacks Rank: BofA’s Zacks Rank #2 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of a positive earnings surprise.
Additionally, estimates for the upcoming release indicate year-over-year growth of about 67.1%.
Stocks to Consider
Here are a few major bank stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.
BB&T Corporation has an Earnings ESP of +5.71% and a Zacks Rank #3. It is scheduled to report first-quarter 2017 results on Apr 20.
The Earnings ESP for KeyCorp (KEY - Free Report) is +3.70% and it carries a Zacks Rank #3. The company is scheduled to release results on Apr 20.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 "Strong Sells." Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>
Unique Zacks Analysis of Your Chosen Ticker
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BofA (BAC) Q1 Earnings: What's in the Cards for the Stock?
Bank of America Corp. (BAC - Free Report) is slated to release first-quarter 2017 results on Tuesday, Apr 18, before the opening bell. Notably, of late, the company’s quarterly earnings estimates have been relatively stable. So, what to expect from the company in the upcoming earnings release?
Last quarter, improved fixed income and equity trading revenues, a rise in mortgage banking income, efficient expense control and fall in provisions helped BofA to surpass the Zacks Consensus Estimate. However, these were partially offset by lower investment banking fees.
The earnings beat along with growing optimism surrounding improvement in the operating backdrop translated into enhanced share price movement. For the three months ended Mar 31, BofA stock increased 4.7%. Further, BofA has a decent surprise history, as evident from the chart below:
Bank of America Corporation Price and EPS Surprise
Bank of America Corporation Price and EPS Surprise | Bank of America Corporation Quote
Factors to Influence Q1 Results
Trading Revenues Should Improve: Ambiguity related to Trump's policy changes is expected to lead to better trading activities. Hence, trading revenues are projected to increase, driven by the strength in equity as well as fixed income and currencies.
Modest Increase in Net Interest Income (NII) Likely: Slowdown in loan growth during the quarter due to uncertainty over Trump’s policy goals and cheaper ways to borrow might have led to marginal NII growth, despite a rise in interest rates.
Notably, management expects NII to increase $600 million despite two less days in the quarter based on expectations of interest rates remaining stable as well as modest loan and deposit growth.
Investment Banking Might have Helped: During the quarter, M&A activities were robust while equity and debt underwriting increased. Per the Thomson Reuters data, BofA is likely to record a year-over-year increase in investment banking fees in the quarter.
Mortgage Revenues Likely to Grow: An expected higher rate environment and less-concerned lenders over regulatory restrictions drove demand for refinancing during the quarter. This might have helped BofA generate decent mortgage revenues.
Costs Might have Risen Marginally: Similar to the past years, management should have incurred nearly $1.3 billion for retirement eligible incentives and seasonally elevated payroll tax expense during the quarter. Also, with a rebound in capital markets based activity, the company should have recorded related increase in expenses.
Nonetheless, in the absence of additional legal costs and provisions, overall operating expenses should have been stable in the quarter, given the success of BofA’s cost-saving efforts and other restructuring initiatives.
Earnings Whispers
Chances of BofA beating the Zacks Consensus Estimate in the first quarter are less. That 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 increasing chances of an earnings beat.
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 BofA is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 35 cents.
Zacks Rank: BofA’s Zacks Rank #2 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of a positive earnings surprise.
Additionally, estimates for the upcoming release indicate year-over-year growth of about 67.1%.
Stocks to Consider
Here are a few major bank stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.
BB&T Corporation has an Earnings ESP of +5.71% and a Zacks Rank #3. It is scheduled to report first-quarter 2017 results on Apr 20.
SunTrust Banks, Inc. (STI - Free Report) is scheduled to report results on Apr 21. It has an Earnings ESP of +2.41% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for KeyCorp (KEY - Free Report) is +3.70% and it carries a Zacks Rank #3. The company is scheduled to release results on Apr 20.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 "Strong Sells." Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>