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5 Major Bank Stocks Poised to Beat Earnings Estimates in Q1
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The Q1 earnings season is just around the corner and investors are eagerly awaiting the major bank results, which have remained in the spotlight throughout the quarter for a number of reasons.
The quarter witnessed investors’ anxiety on uncertainty over the number of rate hikes on upbeat economic numbers and rising inflation, which pulled the benchmark 10-year Treasury bond yields down. This somewhat reversed the rally experienced by bank stocks since last September. Moreover, Trump’s trade-tariff announcements on Chinese imports affected the stock market rally in the quarter.
After three straight quarters of muted activities, it appears that volatility is back in the markets, as seen in both February and March. This indicates higher trading activities and increased trading revenues, primarily for big banks.
Notably, the first-quarter earnings are expected to report decent numbers as compared with the last quarter (impacted by huge one-time charges related to the tax law reform), with a rising interest-rate environment aiding net interest margins — the backbone for banks’ top-line growth.
In addition to the benefits from the rising interest rates, a moderate improvement in lending will likely energize interest income for banks. Per the Federal Reserve’s latest data, loans are predicted to improve slightly on a sequential basis in the to-be-reported quarter. Particularly, weakness in revolving home equity loans might offset growth in commercial and industrial (C&I), consumer and overall real estate loans to some extent.
Therefore, major banks in the S&P 500 index (accounting for nearly 45% of the Zacks Finance Sector'stotal earnings) are projected to witness 11.1% year-over-year jump in earnings in the quarter to be reported. This comes in higher than 2.7% growth recorded in the prior quarter.
(For detailed look at the earnings outlook for this industry and others, please read our Earnings Preview article.)
The trend of earning solid advisory and underwriting fees for debt and equity issuance might reverse in the first quarter, as rising rates will limit corporates’ involvement in these activities. As debt origination fees typically account for about half of total investment banking fees, this could deal a blow to the banks.
However, strong equity issuances globally might have got boosted from IPOs and follow-on offerings. So, equity underwriting fees are projected to increase. Also, a potential rise in fees from increasing M&A’s in certain sectors will likely help banks garner advisory fees.
Further, credit quality is anticipated to remain strong, backed by an improving economy and conservative underwriting standards.
Expense reduction, which has helped banks to remain profitable, is not expected to be a major support, as banks have already slashed the majority of unnecessary expenses. While the absence of considerable legal expenses since the last few quarters is encouraging, increased investments in technology to improve digital offerings might escalate costs moderately.
Selecting the Winners
With the upcoming results likely to be impressive, there are a few major banks that are expected to stand out this earnings season. Therefore, this is the right time for you to select some banking stocks that are well positioned to beat earnings estimates in their upcoming releases.
Choosing stocks with earnings beat potential might be a difficult task unless one knows the process to shortlist. One way to do it is by picking stocks that have the combination of a favorable Zacks Rank — Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) — and a positive Earnings ESP.
Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising in their upcoming earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
5 Major Banks Set for Earnings Surprises
Here are five major regional bank stocks that have the right combination of elements to deliver positive earnings surprises in their upcoming announcements:
The Earnings ESP for Wells Fargo (WFC - Free Report) is +0.73% and it carries a Zacks Rank of 3. The company is scheduled to release results on Apr 13.
BB&T Corporation (BBT) has an Earnings ESP of +1.37% and carries a Zacks Rank of 3. It is slated to report results on Apr 19.
The Bank of New York Mellon Corporation (BK - Free Report) is slated to release results on Apr 19. The company, which carries a Zacks Rank of 3, has an Earnings ESP of +1.81%.
The Earnings ESP for U.S. Bancorp (USB - Free Report) is +0.56% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Apr 18.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Image: Bigstock
5 Major Bank Stocks Poised to Beat Earnings Estimates in Q1
The Q1 earnings season is just around the corner and investors are eagerly awaiting the major bank results, which have remained in the spotlight throughout the quarter for a number of reasons.
The quarter witnessed investors’ anxiety on uncertainty over the number of rate hikes on upbeat economic numbers and rising inflation, which pulled the benchmark 10-year Treasury bond yields down. This somewhat reversed the rally experienced by bank stocks since last September. Moreover, Trump’s trade-tariff announcements on Chinese imports affected the stock market rally in the quarter.
After three straight quarters of muted activities, it appears that volatility is back in the markets, as seen in both February and March. This indicates higher trading activities and increased trading revenues, primarily for big banks.
Notably, the first-quarter earnings are expected to report decent numbers as compared with the last quarter (impacted by huge one-time charges related to the tax law reform), with a rising interest-rate environment aiding net interest margins — the backbone for banks’ top-line growth.
In addition to the benefits from the rising interest rates, a moderate improvement in lending will likely energize interest income for banks. Per the Federal Reserve’s latest data, loans are predicted to improve slightly on a sequential basis in the to-be-reported quarter. Particularly, weakness in revolving home equity loans might offset growth in commercial and industrial (C&I), consumer and overall real estate loans to some extent.
Therefore, major banks in the S&P 500 index (accounting for nearly 45% of the Zacks Finance Sector'stotal earnings) are projected to witness 11.1% year-over-year jump in earnings in the quarter to be reported. This comes in higher than 2.7% growth recorded in the prior quarter.
(For detailed look at the earnings outlook for this industry and others, please read our Earnings Preview article.)
The trend of earning solid advisory and underwriting fees for debt and equity issuance might reverse in the first quarter, as rising rates will limit corporates’ involvement in these activities. As debt origination fees typically account for about half of total investment banking fees, this could deal a blow to the banks.
However, strong equity issuances globally might have got boosted from IPOs and follow-on offerings. So, equity underwriting fees are projected to increase. Also, a potential rise in fees from increasing M&A’s in certain sectors will likely help banks garner advisory fees.
Further, credit quality is anticipated to remain strong, backed by an improving economy and conservative underwriting standards.
Expense reduction, which has helped banks to remain profitable, is not expected to be a major support, as banks have already slashed the majority of unnecessary expenses. While the absence of considerable legal expenses since the last few quarters is encouraging, increased investments in technology to improve digital offerings might escalate costs moderately.
Selecting the Winners
With the upcoming results likely to be impressive, there are a few major banks that are expected to stand out this earnings season. Therefore, this is the right time for you to select some banking stocks that are well positioned to beat earnings estimates in their upcoming releases.
Choosing stocks with earnings beat potential might be a difficult task unless one knows the process to shortlist. One way to do it is by picking stocks that have the combination of a favorable Zacks Rank — Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) — and a positive Earnings ESP.
Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising in their upcoming earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
5 Major Banks Set for Earnings Surprises
Here are five major regional bank stocks that have the right combination of elements to deliver positive earnings surprises in their upcoming announcements:
Comerica Incorporated (CMA - Free Report) is slated to release results on Apr 17. The company has an Earnings ESP of +0.93% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Earnings ESP for Wells Fargo (WFC - Free Report) is +0.73% and it carries a Zacks Rank of 3. The company is scheduled to release results on Apr 13.
BB&T Corporation (BBT) has an Earnings ESP of +1.37% and carries a Zacks Rank of 3. It is slated to report results on Apr 19.
The Bank of New York Mellon Corporation (BK - Free Report) is slated to release results on Apr 19. The company, which carries a Zacks Rank of 3, has an Earnings ESP of +1.81%.
The Earnings ESP for U.S. Bancorp (USB - Free Report) is +0.56% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Apr 18.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>