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Bank of America, Wells Fargo and PNC Financial are part of Zacks Earnings Preview
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For Immediate Release
Chicago, IL – October 16, 2017 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Bank of America (NYSE:(BAC - Free Report) – Free Report), Wells Fargo (NYSE:(WFC - Free Report) – Free Report) and PNC Financial (NYSE:(PNC - Free Report) – Free Report).
Every day, Zacks.com makes their Bull Stock of the Day available, free of charge. To see it, click here.
Regional Banks May Do Better than the Big Banks
Results from the big banks largely came in line with expectations, though Bank of America (NYSE:(BAC - Free Report) – Free Report) did a little better and Wells Fargo (NYSE:(WFC - Free Report) – Free Report) was a tad below expectations. We knew that improved net interest margins will help the profitability of the core lending business even though growth in loan portfolios was expected to decelerate further. Management teams blamed policy uncertainty out of Washington as a contributing factor to weakening loan demand, though loan growth at PNC Financial (NYSE:(PNC - Free Report) – Free Report) likely offers favorable read-throughs for other regional operators that are on deck to release results this week.
No major surprises with respect to other areas of weakness like trading revenues, mortgages and credit cards. Credit card charge-offs are starting to increase across the board in the industry, as is typically the case at this stage in the credit cycle. All the players appear to be doing a good job with expense controls, which has been a key earnings driver over the last few years of flat net-interest margins, a by-product of super-loose Fed policy. But margins have started going up, which is helping offset the drags from other areas.
The bottom line on bank results is that they aren’t bad, but they aren’t great either. The stocks have responded negatively to the results because they had run up so much ahead of these earnings reports. The Zacks Major Banks industry, which includes all the big banks, has lost ground over the last few sessions, but is still up significantly since September 8th.
Finance Sector Scorecard
It is still fairly early, with results from only 6 Finance sector companies in the S&P 500 (out of 97 total) out already. But these 6 companies are the some of the largest in the entire index and account for 30.1% of the sector’s total market capitalization in the index. Total earnings for these 6 Finance sector companies are up +6.8% from the same period last year on +1.7% higher revenues, with 83.3% beating EPS estimates and 50% beating top-line estimates.
What this shows is that the Q3 earnings and revenue growth pace is below what we saw from the same six banks in the preceding quarter as well as the 4-quarter average. The proportion of positive surprises is broadly the same trend.
Looking at Q3 earnings and revenue expectations for the sector as a whole, combining the reported actual results with the still-to-come estimates, Finance sector earnings are expected to be down -4.6% from the same period last year on +1% higher revenues.
The sector’s earnings decline in Q3 will follow double-digit earnings growth in each of the two preceding quarters, as the chart above shows. Earnings growth is expected to be modestly positive for the banking industry, but the drag is coming from the insurance industry which has been hit hard by this recent run of damaging hurricanes.
Please note that the Major Banks industry, of which JPMorgan, Wells Fargo and others are part, accounts for roughly 45% of the sector’s total earnings (insurance is the second biggest earnings contributor, accounting for about 25% of the total).
Q3 Earnings Season Scorecard (as of Friday, October 13, 2017)
We now have Q3 results from 32 S&P 500 members that combined account for 10.3% of the index’s total market capitalization. Total earnings for these companies are up +12.8% from the same period last year on +6.3% higher revenues, with 81.3% beating EPS estimates and 78.1% beating revenue estimates.
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time!Register for your free subscription to Profit from the Pros.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Bank of America, Wells Fargo and PNC Financial are part of Zacks Earnings Preview
For Immediate Release
Chicago, IL – October 16, 2017 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Bank of America (NYSE:(BAC - Free Report) – Free Report), Wells Fargo (NYSE:(WFC - Free Report) – Free Report) and PNC Financial (NYSE:(PNC - Free Report) – Free Report).
To see more earnings analysis, visit https://at.zacks.com/?id=3207.
Every day, Zacks.com makes their Bull Stock of the Day available, free of charge. To see it, click here.
Regional Banks May Do Better than the Big Banks
Results from the big banks largely came in line with expectations, though Bank of America (NYSE:(BAC - Free Report) – Free Report) did a little better and Wells Fargo (NYSE:(WFC - Free Report) – Free Report) was a tad below expectations. We knew that improved net interest margins will help the profitability of the core lending business even though growth in loan portfolios was expected to decelerate further. Management teams blamed policy uncertainty out of Washington as a contributing factor to weakening loan demand, though loan growth at PNC Financial (NYSE:(PNC - Free Report) – Free Report) likely offers favorable read-throughs for other regional operators that are on deck to release results this week.
No major surprises with respect to other areas of weakness like trading revenues, mortgages and credit cards. Credit card charge-offs are starting to increase across the board in the industry, as is typically the case at this stage in the credit cycle. All the players appear to be doing a good job with expense controls, which has been a key earnings driver over the last few years of flat net-interest margins, a by-product of super-loose Fed policy. But margins have started going up, which is helping offset the drags from other areas.
The bottom line on bank results is that they aren’t bad, but they aren’t great either. The stocks have responded negatively to the results because they had run up so much ahead of these earnings reports. The Zacks Major Banks industry, which includes all the big banks, has lost ground over the last few sessions, but is still up significantly since September 8th.
Finance Sector Scorecard
It is still fairly early, with results from only 6 Finance sector companies in the S&P 500 (out of 97 total) out already. But these 6 companies are the some of the largest in the entire index and account for 30.1% of the sector’s total market capitalization in the index. Total earnings for these 6 Finance sector companies are up +6.8% from the same period last year on +1.7% higher revenues, with 83.3% beating EPS estimates and 50% beating top-line estimates.
What this shows is that the Q3 earnings and revenue growth pace is below what we saw from the same six banks in the preceding quarter as well as the 4-quarter average. The proportion of positive surprises is broadly the same trend.
Looking at Q3 earnings and revenue expectations for the sector as a whole, combining the reported actual results with the still-to-come estimates, Finance sector earnings are expected to be down -4.6% from the same period last year on +1% higher revenues.
The sector’s earnings decline in Q3 will follow double-digit earnings growth in each of the two preceding quarters, as the chart above shows. Earnings growth is expected to be modestly positive for the banking industry, but the drag is coming from the insurance industry which has been hit hard by this recent run of damaging hurricanes.
Please note that the Major Banks industry, of which JPMorgan, Wells Fargo and others are part, accounts for roughly 45% of the sector’s total earnings (insurance is the second biggest earnings contributor, accounting for about 25% of the total).
Q3 Earnings Season Scorecard (as of Friday, October 13, 2017)
We now have Q3 results from 32 S&P 500 members that combined account for 10.3% of the index’s total market capitalization. Total earnings for these companies are up +12.8% from the same period last year on +6.3% higher revenues, with 81.3% beating EPS estimates and 78.1% beating revenue estimates.
Zacks "Profit from the Pros" e-mail newsletter offers continuous coverage of the industries and the stocks poised to outperform the market. Click to subscribe to this free newsletter today.
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time!Register for your free subscription to Profit from the Pros.
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.