Back to top

Image: Bigstock

CMA vs. NTRS: Which Stock is Poised for Better Q1 Earnings?

Read MoreHide Full Article

The earnings season seems to have gotten off to a decent start with the banking giants reporting improved earnings and revenues so far. These big banks’ top line was supported by increasing loan balances, expanding net interest margin due to higher interest rates and boost in trading revenues due to improved volatility.

Per our latest Earnings Preview, total earnings for five of the 98 Finance Sector companies on the S&P 500 (accounting 23.7% of the total market cap) that have reported earnings so far, have increased 20.4% from year-ago quarter on 6.9% higher revenue growth.

Further, for the first quarter as a whole, earnings of the finance sector are expected to be up 22.7% year over year on 4.7% higher revenues.

Earnings releases will be coming in thick this week with Comerica Incorporated (CMA - Free Report) and Northern Trust Corporation (NTRS - Free Report) , scheduled to report on Apr 17, before the opening bell.

Let’s have a look at what can be expected from these two Major Regional Banks when they report first-quarter 2018 earnings.

Comerica

Comerica’s earnings are expected to be $1.49, reflecting 34.2% improvement from the last-year quarter.

Also, the Zacks Consensus Estimate for sales is $811.6 million, 9.5% higher than the prior-year quarter. Rise in loans along with a favorable interest rate environment is likely to benefit the bank’s net interest income (NII). Fee income is expected to benefit from higher volume of M&A and improved equity markets, partially offset by poor mortgage activities during the quarter.

Nevertheless, the tax reform is expected to benefit its results. Also, since credit quality trend remained benign during first quarter, the consensus estimate reflects a decline of 21.3% and 19.8% in non-performing assets and non-performing loans, respectively, on a year-over-year basis.

Also, our quantitative model predicts an earnings beat for Comerica as it has an Earnings ESP of +0.95% and a Zacks Rank #3 (Hold).

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

(Read more: Why an Earnings Beat is Likely for Comerica in Q1)

The story about Comerica’s impressive earnings surprise history is better told by the chart below:

Comerica Incorporated Price and EPS Surprise

 

Northern Trust

The Zacks Consensus Estimate for to-be-reported quarter earnings reflects a year-over-year improvement of 30.3%.

Also, Northern Trust is expected to record a rise in revenues in the first quarter supported by higher interest and fee income. The Zacks Consensus Estimate for sales of $1.45 billion shows 13% year-over-year growth.

As Northern Trust incorporates a lag effect while calculating fees for custody and investment management, expansion of three-month LIBOR rate during the quarter is likely to drive related fees. Per the Zacks Consensus Estimate, custody fees are likely to increase 23.1% to $379 million. Further, with the improvement in foreign exchange (FX) backdrop, the company’s revenues from FX trading might increase.

However, the company’s expenses are expected to trend upward due to its investments in new business activities and seasonally higher compensation expenses.

Also, our quantitative model predicts that the chances of an earnings beat for Northern Trust are low. The stock has Earnings ESP of -0.10% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

(Read more: Can High Revenues Drive Northern Trust's Q1 Earnings?)

Northern Trust has a decent earnings surprise history, as evident from the chart below:

Northern Trust Corporation Price and EPS Surprise

 

Our Take

On the basis of our quantitative model and earnings growth perspectives, we find that Comerica is likely to report better first-quarter results than Northern Trust.

Investor Alert: Breakthroughs Pending

A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.

Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.

Click here to see them >>


Unique Zacks Analysis of Your Chosen Ticker


Pick one free report - opportunity may be withdrawn at any time


Comerica Incorporated (CMA) - $25 value - yours FREE >>

Northern Trust Corporation (NTRS) - $25 value - yours FREE >>

Published in