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What's in Store for Regions (RF) Stock This Earnings Season?
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Regions Financial Corporation (RF - Free Report) is scheduled to report third-quarter 2017 results tomorrow, before the opening bell. While revenues and earnings are anticipated to be up year over year, we can’t conclusively predict a likely earnings beat.
Before we discuss why an earnings beat might not be in store and what could influence the results, let’s take a look at how the company performed in the last quarter.
This Birmingham, AL-based company’s second-quarter 2017 earnings outpaced the Zacks Consensus Estimate owing to impressive growth in revenues aided by easing margin pressure. Further, the company recorded growth in loans, though deposits balance remained stable. Credit quality metrics also improved. Rise in adjusted operating expenses and decline in non-interest income were the undermining factors.
Notably, this upbeat performance resulted in an appreciation of the company’s share price. For the three-month period ended Sep 30, 2017, the stock gained around 4%.
Also, the Zacks Consensus Estimate remained unchanged at 25 cents over the last 30 days, reflecting a year-over-year improvement of 5.3%. The Zacks Consensus Estimate for sales of $1.45 billion indicates around 1% growth from the prior-year quarter.
In addition, Regions is projected to record slight decline on a sequential basis in average interest-earning assets as the Zacks Consensus Estimate for the to-be-reported quarter is $109.7 billion.
Regions has an impressive earnings surprise history, as evident from the chart below:
Regions Financial Corporation Price and EPS Surprise
Will the upcoming earnings release give a boost to Regions’ stock? This depends largely on whether the firm is able to post a beat in the third quarter. However, our quantitative model doesn’t conclusively point toward a likely earnings beat this time. Here’s why:
Regions doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) — for increasing its chances of an earnings beat.
Zacks ESP: The Earnings ESP for Regions is +0.48%. This is a major indicator of a likely positive earnings surprise for the company. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Regions’ Zacks Rank #4 decreases the predictive power of ESP.
It should be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Factors to Influence Q3 Results
Loan Growth: Per the Federal Reserve’s latest data, loans grew on a sequential basis during the third quarter. Improvement in loan demand, particularly commercial and industrial, and consumer loans during the to-be-reported quarter are anticipated to support the company’s net interest income.
In addition, management’s expectations of loan and deposit growth in 2017 will likely be reflected in this quarter. The bank projects average loans to be flat to marginally down on a year-over-year basis, excluding the impact of the third-party indirect-vehicle portfolio. Average deposits are estimated to be relatively stable compared to the prior year.
Modest Rise in Net Interest Income (NII): Given the effect of rise in interest rates, Regions should have recorded an increase in NII. Notably, management’s projections of the 2017 NII and other financing income to grow in the range of 3-5% are likely to show impact in the third quarter as well.
Non Interest Income Might Escalate: The persistent decline in non-interest income has weighed on the top line for the last few years. Nevertheless, adjusted non-interest income is estimated to grow 1-3%. Management expects a pick-up in capital markets revenues, along with modest growth in wealth management, mortgage and card, and ATM fees to contribute to overall growth in adjusted non-interest income during the second half of the year.
Notably, the Zacks Consensus Estimate for capital market revenues is estimated to improve sequentially to $41.4 million, while commercial credit fee income is projected to remain stable at $18.2 million.
Expenses Might Rise Slightly: Regions’ efficient expense management might decently support the bottom line during the quarter. Owing to the current global macroeconomic headwinds, management’s plan to slash $300 million of core expenses by 2018 is right on track. Furthermore, encouraged by recent increases in market interest rates, Regions expects to eliminate an additional $100 million by 2019.
However, the company projects adjusted expenses to trend from a flat to 1% increase, while efficiency ratio is expected to scale at approximately 62% in 2017. Adjusted operating leverage is projected in the range of 2-4%.
Stocks That Warrant a Look
Here are some other stocks you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.
The Earnings ESP for Franklin Resources, Inc. (BEN - Free Report) is +0.56% and it also carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Oct 26.
Fifth Third Bancorp (FITB - Free Report) has an Earnings ESP of +0.25% and holds a Zacks Rank of 2. It is scheduled to report results on Oct 24.
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With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
What's in Store for Regions (RF) Stock This Earnings Season?
Regions Financial Corporation (RF - Free Report) is scheduled to report third-quarter 2017 results tomorrow, before the opening bell. While revenues and earnings are anticipated to be up year over year, we can’t conclusively predict a likely earnings beat.
Before we discuss why an earnings beat might not be in store and what could influence the results, let’s take a look at how the company performed in the last quarter.
This Birmingham, AL-based company’s second-quarter 2017 earnings outpaced the Zacks Consensus Estimate owing to impressive growth in revenues aided by easing margin pressure. Further, the company recorded growth in loans, though deposits balance remained stable. Credit quality metrics also improved. Rise in adjusted operating expenses and decline in non-interest income were the undermining factors.
Notably, this upbeat performance resulted in an appreciation of the company’s share price. For the three-month period ended Sep 30, 2017, the stock gained around 4%.
Also, the Zacks Consensus Estimate remained unchanged at 25 cents over the last 30 days, reflecting a year-over-year improvement of 5.3%. The Zacks Consensus Estimate for sales of $1.45 billion indicates around 1% growth from the prior-year quarter.
In addition, Regions is projected to record slight decline on a sequential basis in average interest-earning assets as the Zacks Consensus Estimate for the to-be-reported quarter is $109.7 billion.
Regions has an impressive earnings surprise history, as evident from the chart below:
Regions Financial Corporation Price and EPS Surprise
Regions Financial Corporation Price and EPS Surprise | Regions Financial Corporation Quote
Will the upcoming earnings release give a boost to Regions’ stock? This depends largely on whether the firm is able to post a beat in the third quarter. However, our quantitative model doesn’t conclusively point toward a likely earnings beat this time. Here’s why:
Regions doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) — for increasing its chances of an earnings beat.
Zacks ESP: The Earnings ESP for Regions is +0.48%. This is a major indicator of a likely positive earnings surprise for the company. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Regions’ Zacks Rank #4 decreases the predictive power of ESP.
It should be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Factors to Influence Q3 Results
Loan Growth: Per the Federal Reserve’s latest data, loans grew on a sequential basis during the third quarter. Improvement in loan demand, particularly commercial and industrial, and consumer loans during the to-be-reported quarter are anticipated to support the company’s net interest income.
In addition, management’s expectations of loan and deposit growth in 2017 will likely be reflected in this quarter. The bank projects average loans to be flat to marginally down on a year-over-year basis, excluding the impact of the third-party indirect-vehicle portfolio. Average deposits are estimated to be relatively stable compared to the prior year.
Modest Rise in Net Interest Income (NII): Given the effect of rise in interest rates, Regions should have recorded an increase in NII. Notably, management’s projections of the 2017 NII and other financing income to grow in the range of 3-5% are likely to show impact in the third quarter as well.
Non Interest Income Might Escalate: The persistent decline in non-interest income has weighed on the top line for the last few years. Nevertheless, adjusted non-interest income is estimated to grow 1-3%. Management expects a pick-up in capital markets revenues, along with modest growth in wealth management, mortgage and card, and ATM fees to contribute to overall growth in adjusted non-interest income during the second half of the year.
Notably, the Zacks Consensus Estimate for capital market revenues is estimated to improve sequentially to $41.4 million, while commercial credit fee income is projected to remain stable at $18.2 million.
Expenses Might Rise Slightly: Regions’ efficient expense management might decently support the bottom line during the quarter. Owing to the current global macroeconomic headwinds, management’s plan to slash $300 million of core expenses by 2018 is right on track. Furthermore, encouraged by recent increases in market interest rates, Regions expects to eliminate an additional $100 million by 2019.
However, the company projects adjusted expenses to trend from a flat to 1% increase, while efficiency ratio is expected to scale at approximately 62% in 2017. Adjusted operating leverage is projected in the range of 2-4%.
Stocks That Warrant a Look
Here are some other stocks you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.
T. Rowe Price Group, Inc. (TROW - Free Report) is slated to release results on Oct 26. The company has an Earnings ESP of +3.25% and carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for Franklin Resources, Inc. (BEN - Free Report) is +0.56% and it also carries a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Oct 26.
Fifth Third Bancorp (FITB - Free Report) has an Earnings ESP of +0.25% and holds a Zacks Rank of 2. It is scheduled to report results on Oct 24.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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