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Comerica (CMA) to Report Q1 Earnings: What's in the Cards?

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Comerica Incorporated (CMA - Free Report) is scheduled to report first-quarter 2021 results before the opening bell on Apr 20. The bank’s revenues are likely to have witnessed a fall from the year-ago reported figures, while its earnings are expected to have risen year over year.

The company’s fourth-quarter 2020 results were supported by lower provisions and a strong capital position.  However, decline in loans and higher expenses were the undermining factors.

Notably, Comerica boasts an impressive earnings surprise history. It surpassed estimates in three of the trailing four quarters, delivering an earnings surprise of 52.47%, on average.

The Zacks Consensus Estimate for earnings for the first quarter is pegged at $1.38 per share, which suggests a substantial increase from the year-ago reported number. However, the consensus estimate for sales of $715.9 million indicates a 4.6% fall.

Factors at Play

Muted Net Interest Income (“NII”): Per the Fed’s latest data, the overall lending scenario was soft during the January-March quarter, with commercial real estate as well as consumer loan portfolios having offered some support. Conversely, weak home equity, and commercial and industrial loans might have offset some growth. The primary reason for low loan demand is the sluggish resumption of business activities.

Moreover, interest rates at near-zero level are likely to have hurt Comerica’s net interest margin, thereby impacting NII. However, steepening of the yield curve (the difference between short- and long-term interest rates) might have offered some support.

Also, the Zacks Consensus Estimate for average earning assets of $79.1 billion for the quarter indicates 17.1% year-over-year growth.

The Zacks Consensus Estimate of $469 million for NII suggests an 8.6% year-over-year fall.

Management expects average loans to decline. The outlook underscores decline in Mortgage Banker Finance and Energy loans, partially offset by growth in National Dealer Services and general Middle Market.

The company projects NII to shrink on lower interest rates and reduced average loan balances, partly offset by management of loan and deposit pricing.

Higher Fee Income: Deposits have shown improvement in the quarter, aided by an incremental stimulus program, which is likely to have resulted in higher revenues from service charges on deposits.

Also, consumer spending remained decent in the first quarter, resulting in the usage of debit/credit cards and merchant payment-processing services. Thus, card fees (a major contributor to fee income in 2020) might have lent support to the company’s top line in the to-be-reported quarter.

The Zacks Consensus Estimate for card fees of $67 million implies a rise of 13.6% year over year.

The consensus estimate of $250 million for fee income suggests a 5.5% year-over-year rise.

Management expects non-interest income to likely decline as fourth-quarter levels of deferred compensation asset returns, card fees, warrants and securities trading income are not expected to repeat, along with a seasonal reduction in syndication fees. This is likely to be partially offset by higher service charges on deposit accounts, fiduciary income and brokerage fees.

Controlled Expenses: Its GEAR Up initiatives target keeping expenses under control. However, some impacts of technological investment and restructuring charges are likely to have persisted.

Management projects non-interest expenses to decline, resulting from lower deferred compensation and pension expenses, seasonal reduction in occupancy, staff insurance, and advertising.

Asset Quality: With sufficient reserve builds made by the company in 2020 owing to the worsening macroeconomic backdrop, the chances of substantial increase in provision for loan losses in the first quarter are less.

The consensus estimate for non-performing assets is pegged at $372 million for the to-be-reported quarter, indicating a 48.8% increase from the prior-year quarter. Also, the consensus estimate for non-performing loans of $375 million suggests a 56.9% rise.

Management expects provisions for credit losses to be reflective of the economic environment, including pace of economic recovery. Net charge-offs are expected to be modestly higher.

Now, let’s have a look at what our quantitative model predicts:

Our proven model doesn't conclusively predict an earnings beat for Comerica. 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 — 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 Comerica is -0.09%.

Zacks Rank: Comerica currently has a Zacks Rank #3.

Comerica Incorporated Price and EPS Surprise

Comerica Incorporated Price and EPS Surprise

Comerica Incorporated price-eps-surprise | Comerica Incorporated Quote

The Zacks Consensus Estimate of $1.38 per share for first-quarter earnings calls for a substantial jump on a year-over-year basis. However, the consensus estimate for sales of $715.9 million suggests a 4.6% fall, year on year.

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.

BankUnited (BKU - Free Report) is scheduled to release earnings on Apr 22. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.64%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Earnings ESP for Invesco (IVZ - Free Report) is +1.13% and it carries a Zacks Rank #1 at present. The company is slated to report quarterly numbers on Apr 27.

Capital One Financial Corporation (COF - Free Report) is slated to report quarterly results on Apr 27. The company currently has an Earnings ESP of +1.47% and a Zacks Rank of 3.

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