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Is an Earnings Beat in Store for Toronto-Dominion (TD) in Q4?

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The Toronto-Dominion Bank (TD - Free Report) is slated to announce fourth-quarter and fiscal 2020 (ended Oct 31) results on Dec 3, before the opening bell. While its earnings in the to-be-reported quarter are expected to have witnessed a decline on a year-over-year basis, revenues are likely to have improved.

In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate. Higher revenues and a decline in expenses primarily supported results.

Also, Toronto-Dominion has a decent earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in two, matched in one and lagged in one of the trailing four quarters.

Toronto Dominion Bank The Price and EPS Surprise

 

Toronto Dominion Bank The Price and EPS Surprise

Toronto Dominion Bank The price-eps-surprise | Toronto Dominion Bank The Quote

For the to-be-reported quarter, the Zacks Consensus Estimate for earnings is pegged at 94 cents, which indicates a decline of 21.7% from the prior-year quarter’s reported number. The figure has been unchanged over the past seven days.

The consensus estimate for sales is pegged at $8.56 billion, suggesting a rise of 9.6% from the year-ago quarter.

Before we take a look at what our quantitative model predicts, let’s check the factors that are expected to have influenced Toronto-Dominion’s fiscal fourth-quarter performance.

Factors to Note

Net Interest Income (NII): The overall demand for loans remained decent in the August-October quarter as business activities started to resume. Despite decent growth in loans, the company’s NII is expected to have been negatively impacted by the low interest rate environment.

Investment Banking Revenues: As economic and business activities started to resume, deal-making rebounded in the August-October quarter. Thus, with an increase in global M&A activities, Toronto-Dominion’s advisory fees are likely to have been positively impacted.

Moreover, IPO activities rebounded in the to-be-reported quarter. Further, as companies continued to build liquidity to tide over the pandemic-induced crisis, there was a rise in follow-up equity issuances. Also, amid near-zero interest rates and the Federal Reserve’s bond purchase program that commenced on Mar 23, bond issuance volumes were strong as companies took this as an opportunity to bolster their balance sheets. Hence, growth in Toronto-Dominion’s underwriting fees is likely to have been impressive in the fiscal fourth quarter.

Trading Revenues: Driven by the continued coronavirus-induced uncertainty, equity markets witnessed a significant rise in volatility along with higher client activity in the fiscal fourth quarter, similar to the previous two reported quarters. Moreover, fixed income markets’ performance remained strong. Hence, Toronto-Dominion’s equity and fixed income markets revenues are expected to have improved in the to-be-reported quarter.

Provisions: Having already built significant reserves, owing to the deterioration in the macro-economic backdrop in the previous reported quarters in fiscal 2020, Toronto-Dominion is less likely to have recorded a substantial increase in provision for loan losses in the fiscal fourth quarter.

Earnings Whispers

According to our quantitative model, the chances of Toronto-Dominion beating the Zacks Consensus Estimate this time are high. This is because it has the right combination of the two key ingredients, a positive Earnings ESP and a Zacks Rank #3 (Hold) or better, which increases 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 Toronto-Dominion is +3.63%.

Zacks Rank: The company currently has a Zacks Rank #2 (Buy).

Stocks Worth a Look

Commerce Bancshares, Inc. (CBSH - Free Report) has witnessed a 22.7% upward earnings estimate revision for 2020 over the past 60 days. The company’s shares have risen 1.5% in the past six months. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Old Second Bancorp, Inc. (OSBC - Free Report) shares have rallied 23.3% in six months’ time. Further, the company’s earnings estimates for the ongoing year have moved 24.7% north in the past 60 days. The company currently carries a Zacks Rank of 2.

The Zacks Consensus Estimate for earnings for the current year for Independent Bank Corporation (IBCP - Free Report) , carrying a Zacks Rank #1, has been revised 32.4% upward in the past 60 days. The company’s share price has jumped 17.8% in the past six months.

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