Comerica Incorporated (CMA - Free Report) is scheduled to report third-quarter 2020 results before the opening bell on Oct 20. The bank’s revenues and earnings are likely to have witnessed a fall from the year-ago reported figures.
The company’s second-quarter results were affected by lower net interest income and higher provisions. However, rise in loans and deposits acted as tailwinds.
Notably, Comerica has a decent earnings surprise history. The company's earnings surpassed the consensus estimate in three of the trailing four quarters and missed in one, with the average positive surprise being 32.15%.
The Zacks Consensus Estimate for earnings for the third quarter is pegged at 85 cents, which suggests a decline of 56% from the year-ago reported number. Also, the consensus estimate for sales of $693.9 million indicates a 17.6% year-over-year fall.
Factors at Play
Lower Net Interest Income (NII): A muted lending scenario, mainly in the commercial and real estate loans front (accounting for almost 89% of the company’s total loans and leases), is expected to have affected interest income during the quarter.
Also, the Fed continued to keep interest rates at near-zero level in order to shield the U.S. economy from the coronavirus outbreak-related mayhem. This is likely to have substantially hurt net interest margin and NII.
The Zacks Consensus Estimate for average earning assets of $75.5 billion for the quarter indicates slight sequential decline.
The Zacks Consensus Estimate of $458 million for NII suggests a 2.8% year-over-year fall.
The company projects $10-$15 million reduction in NII, unusually impacted by lower interest rates and reduced loan balances, partly offset by reduced wholesale debt and one additional day.
Muted Fee Income: Consumer spending remained muted in the third quarter on account of the coronavirus-related concerns, resulting in less usage of debit/credit cards and merchant payment processing services. Thus, card fees (a major contributor to fee income) might have declined in the to-be-reported quarter. The Zacks Consensus Estimate for card fees of $62 million implies a fall of 8.8% from the prior quarter’s reported figure.
However, Comerica’s fee income might have witnessed support from higher service charges on deposit accounts on rise in deposits during the quarter. Further, the consensus estimate for fiduciary income of $54 million indicates 3.8% growth from the previous quarter.
The consensus estimate of $236 million for fee income suggests a 4.5% sequential fall.
The company expects fee income to decline on lower card fees related to transaction activity and reduced market-based investment banking and derivative fees, partially mitigated by elevated service charges on deposit accounts due to increased activity. Notably, higher securities trading income and deferred compensation levels recorded in the second quarter are not expected in the third.
Higher Expenses: Management expects costs to flare up, resulting from higher expenses related to technology and occupancy projects, as well as higher charitable contributions and seasonal impacts of marketing and staff insurance expenses. However, it expects this to be mostly negated by continued expense discipline and reduction in COVID-19-related costs.
Asset Quality: With sufficient reserve builds made by the company in the first half of the year owing to the worsening macroeconomic backdrop, the chances of substantial increase in provision for loan losses in the third quarter are less.
The consensus estimate for non-performing assets is pegged at $324 million for the to-be-reported quarter, which indicates a 14.9% increase from the prior-year quarter. Also, the consensus estimate for non-performing loans of $345 million suggests a 27.3% rise.
Now, let’s have a look at what our quantitative model predicts:
The chances of Comerica beating the Zacks Consensus Estimate in the third quarter are less. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Comerica is -0.44%.
Zacks Rank: Comerica currently has a Zacks Rank #3.
Stocks to Consider
Here are some finance stocks that you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model.
CullenFrost Bankers, Inc. (CFR - Free Report) is scheduled to release quarterly earnings on Oct 29. The company, which carries a Zacks Rank #3 currently, has an Earnings ESP of +2.61%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Navient Corporation (NAVI - Free Report) is set to release quarterly results on Oct 20. The company currently has an Earnings ESP of +9.46% and a Zacks Rank of 1.
The Earnings ESP for Associated Banc-Corp (ASB - Free Report) is +2.71% and the company presently carries a Zacks Rank #3. It is scheduled to report quarterly numbers on Oct 22.
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