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Will UMB Financial (UMBF) Surprise This Earnings Season?

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UMB Financial Corporation (UMBF - Free Report) is scheduled to report its second-quarter 2014 results on Jul 23.

UMB Financial delivered positive earnings surprises in three of the trailing four quarters. First-quarter 2014 earnings of 52 cents per share missed the Zacks Consensus Estimate by 27.8%. The quarter witnessed increasing provision and higher expenses. However, higher interest income and non-interest income were the positives.

Is the company likely to miss earnings estimates in the upcoming announcement as well? Let’s see how things have shaped up for this announcement.

Factors to Influence Q2 Results

We observed that UMB Financial has been facing challenges in controlling its non-interest expenses that ha been escalating over the past few years. As the company has not revealed any measure to counter the trend during the quarter, we expect expenses to remain elevated.

Further, provision for credit losses, which has been exhibiting an increasing trend over the past few quarters, might affect the company’s bottom-line growth. Among other factors, provision depends on historic losses and size of the loan portfolio which shows continued improvement. We expect a higher loan balance to result in higher provision in this quarter as well.

However, UMB Financial’s revenues can get a boost owing to income from trust and securities processing, which constitutes a major source of non-interest income and has been consistently growing over the past few years.  Trust and securities processing income relates to fees earned on personal and corporate trust accounts, custody of securities services, trust investments and investment management services, and mutual fund assets servicing. Given a favorable equity and asset market backdrop, we expect growth in this source of income to drive revenue expansion in this quarter as well.

Activities of UMB Financial during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter remained stable at 76 cents per share over the last 7 days.

Earnings Whispers

Our proven model does not conclusively show that UMB Financial is likely to beat the Zacks Consensus Estimate in the second quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least #2 (Buy) or #3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP:  The Earnings ESP for UMB Financial is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 76 cents per share.

Zacks Rank: UMB Financial’s Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise call.

Stocks That Warrant a Look

Here are some stocks in the finance sector you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

CIT Group Inc. (CIT - Free Report) has an earnings ESP of +2.33% and carries a Zacks Rank #3. It is scheduled to report its second-quarter results on Jul 22.

Regions Financial Corp. (RF - Free Report) has an earnings ESP of +4.76% and carries a Zacks Rank #3. It is scheduled to report its second-quarter results on Jul 22.

Hancock Holding Co. has an earnings ESP of +1.70% and carries a Zacks Rank #3. It is scheduled to report its second-quarter results on Jul 24.

In-Depth Zacks Research for the Tickers Above

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Regions Financial Corporation (RF) - free report >>

CIT Group Inc. (CIT) - free report >>

UMB Financial Corporation (UMBF) - free report >>

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