We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Why an Earnings Beat Is Unlikely for KeyCorp (KEY) in Q4
Read MoreHide Full Article
KeyCorp (KEY - Free Report) is scheduled to report fourth-quarter and 2017 results on Jan 18, before the opening bell. Its revenues and earnings are projected to grow year over year.
Organic growth remains a key strength for KeyCorp. Rising interest rates came as an added advantage for the bank. Though flatter yield curve offsets the benefits to some extent, pressure on KeyCorp’s net interest margin is likely to ease slightly from the three rate hikes in 2017. Further, the quarter witnessed growth in its consumer loan portfolio as a result of a rise in consumer confidence.
Moreover, President Trump’s success with the tax overhaul boosted the stock market during the quarter and is likely to support KeyCorp’s fee income. The Zacks Consensus Estimate for revenues of $1.58 billion indicates a 1.9% year-over-year improvement for the to-be-reported quarter.
Last quarter, the company’s earnings were in line with the Zacks Consensus Estimate. Lower credit cost, an increase in fee income, and improving loans and deposits were among the positives. However, higher operating expenses were on the downside.
Activities of KeyCorp during the fourth quarter were inadequate to win analysts’ confidence. Thus, over the last 30 days, its Zacks Consensus Estimate for the quarter’s earnings remained stable at 36 cents. Nevertheless, it reflects a year-over-year improvement of 16.1%.
Notably, KeyCorp’s fundamental strength has helped its shares gain 17.8% in the past three months, outperforming the 13.8% growth recorded by the industry.
Will the stock’s rally continue post fourth-quarter earnings release? Let’s see how things are shaping up.
Earnings Whispers
According to our quantitative model, chances of KeyCorp beating the Zacks Consensus Estimate in the fourth quarter are dim. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to be confident of an earnings surprise call.
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 KeyCorp is -0.33%.
Zacks Rank: KeyCorp currently carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP. However, we also need a positive ESP to be confident of an earnings beat.
Net Interest Income to Grow: In addition to higher interest rates, moderate improvement in lending, mostly on the consumer front, is likely to perk up interest income. Notably, the Zacks Consensus Estimate for net interest income is projected to be $966 million, up 1.9% year over year. For 2017, management expects net interest income in the range of $3.8-$3.9 billion.
Modest non-interest income growth: KeyCorp’s fourth-quarter non-interest income will benefit from increasing investment banking income, primarily driven by slightly higher debt placement fees. Also, as the equity markets performed fairly well during the quarter, trust and investment services income is expected to witness a rise.
Nevertheless, due to lower mortgage originations, growth in mortgage banking fees is likely to be rather muted during the quarter. Therefore, non-interest income is projected to record a marginal improvement.
Decline in expenses should support profitability: KeyCorp has been constantly diversifying products, reorganizing operations and exiting unprofitable/non-core businesses. As a result of this, we expect the company’s overall non-interest expenses (excluding merger-related charges) to be manageable. Also, management expects cost savings from the Fist Niagara deal to support the bottom line marginally.
Asset quality to worsen: As KeyCorp is projected to witness a rise in loans, a corresponding increase in provision for loan losses is expected. Further, the Zacks Consensus Estimate for non-performing asset of $570 million and non-performing loans of $530 million, reflect a rise of 2.5% each from the last quarter.
Stocks to Consider
Here are some stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around.
U.S. Bancorp’s (USB - Free Report) Earnings ESP is +0.13% and it carries a Zacks Rank of 3. The company is expected to release fourth-quarter and 2017 results on Jan 17.
M&T Bank Corporation (MTB - Free Report) has an Earnings ESP of +0.45% and a Zacks Rank #3. It is scheduled to report results on Jan 18.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
Image: Bigstock
Why an Earnings Beat Is Unlikely for KeyCorp (KEY) in Q4
KeyCorp (KEY - Free Report) is scheduled to report fourth-quarter and 2017 results on Jan 18, before the opening bell. Its revenues and earnings are projected to grow year over year.
Organic growth remains a key strength for KeyCorp. Rising interest rates came as an added advantage for the bank. Though flatter yield curve offsets the benefits to some extent, pressure on KeyCorp’s net interest margin is likely to ease slightly from the three rate hikes in 2017. Further, the quarter witnessed growth in its consumer loan portfolio as a result of a rise in consumer confidence.
Moreover, President Trump’s success with the tax overhaul boosted the stock market during the quarter and is likely to support KeyCorp’s fee income. The Zacks Consensus Estimate for revenues of $1.58 billion indicates a 1.9% year-over-year improvement for the to-be-reported quarter.
Last quarter, the company’s earnings were in line with the Zacks Consensus Estimate. Lower credit cost, an increase in fee income, and improving loans and deposits were among the positives. However, higher operating expenses were on the downside.
Activities of KeyCorp during the fourth quarter were inadequate to win analysts’ confidence. Thus, over the last 30 days, its Zacks Consensus Estimate for the quarter’s earnings remained stable at 36 cents. Nevertheless, it reflects a year-over-year improvement of 16.1%.
Notably, KeyCorp’s fundamental strength has helped its shares gain 17.8% in the past three months, outperforming the 13.8% growth recorded by the industry.
Will the stock’s rally continue post fourth-quarter earnings release? Let’s see how things are shaping up.
Earnings Whispers
According to our quantitative model, chances of KeyCorp beating the Zacks Consensus Estimate in the fourth quarter are dim. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to be confident of an earnings surprise call.
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 KeyCorp is -0.33%.
Zacks Rank: KeyCorp currently carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP. However, we also need a positive ESP to be confident of an earnings beat.
KeyCorp Price and EPS Surprise
KeyCorp Price and EPS Surprise | KeyCorp Quote
Factors to Influence Q4 Results
Net Interest Income to Grow: In addition to higher interest rates, moderate improvement in lending, mostly on the consumer front, is likely to perk up interest income. Notably, the Zacks Consensus Estimate for net interest income is projected to be $966 million, up 1.9% year over year. For 2017, management expects net interest income in the range of $3.8-$3.9 billion.
Modest non-interest income growth: KeyCorp’s fourth-quarter non-interest income will benefit from increasing investment banking income, primarily driven by slightly higher debt placement fees. Also, as the equity markets performed fairly well during the quarter, trust and investment services income is expected to witness a rise.
Nevertheless, due to lower mortgage originations, growth in mortgage banking fees is likely to be rather muted during the quarter. Therefore, non-interest income is projected to record a marginal improvement.
Decline in expenses should support profitability: KeyCorp has been constantly diversifying products, reorganizing operations and exiting unprofitable/non-core businesses. As a result of this, we expect the company’s overall non-interest expenses (excluding merger-related charges) to be manageable. Also, management expects cost savings from the Fist Niagara deal to support the bottom line marginally.
Asset quality to worsen: As KeyCorp is projected to witness a rise in loans, a corresponding increase in provision for loan losses is expected. Further, the Zacks Consensus Estimate for non-performing asset of $570 million and non-performing loans of $530 million, reflect a rise of 2.5% each from the last quarter.
Stocks to Consider
Here are some stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around.
Bank Of New York Mellon Corporation (BK - Free Report) has an Earnings ESP of +0.16% and a Zacks Rank #3 (Hold). It is slated to report fourth-quarter and 2017 results on Jan 18. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
U.S. Bancorp’s (USB - Free Report) Earnings ESP is +0.13% and it carries a Zacks Rank of 3. The company is expected to release fourth-quarter and 2017 results on Jan 17.
M&T Bank Corporation (MTB - Free Report) has an Earnings ESP of +0.45% and a Zacks Rank #3. It is scheduled to report results on Jan 18.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>