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Rising Loans, Rates to Support Comerica's (CMA) Q3 Earnings
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Comerica Incorporated (CMA - Free Report) is scheduled to report third-quarter 2022 results before the opening bell on Oct 19. The bank’s revenues are likely to have increased from the year-ago reported figure, while earnings are projected to have remained flat.
Comerica’s better-than-expected earnings for second-quarter 2022 reflected high total loan balances and a significant decrease in non-performing assets. However, high expenses were undermining factors.
CMA has a decent surprise history. Its earnings surpassed estimates in three of the trailing four quarters and missed in the other, the average beat being 5.99%.
CMA’s activities in the to-be-reported quarter were adequate to instill analysts’ confidence in the stock. Evidently, the Zacks Consensus Estimate of $2.57 for third-quarter earnings has been revised marginally upward in the past week. The estimate indicates a 35.3% rise from the year-ago quarter’s reported figure. The consensus estimate for revenues is pegged at $961.5 million, suggesting growth of 27.4% from the year-ago reported number.
Factors at Play
Net Interest Income (NII): While lending activity improved sequentially in the third quarter, the pace of loan growth across most categories slowed as the quarter progressed. Per the Fed’s latest data, residential real estate loans and consumer loans slightly moderated in the third quarter from the second quarter.
Commercial real estate loans, as well as commercial and industrial loan growth, accelerated in the quarter under review. This is likely to have aided the company’s third-quarter performance as the majority of its loan portfolio comprises commercial and commercial mortgage loans.
In mid-September, CMA provided an update at a conference, stating that as of August end, average loans stood at $50.9 billion, increasing $900 million on a sequential basis. With strong loan pipelines, the company is anticipated to have ended the quarter with higher loan balances.
Decent lending aside, higher interest rates are expected to have supported CMA’s NII. In the third quarter, the Fed hiked interest rates by 150 basis points. This is likely to have had a favorable impact on CMA’s net interest margin and NII.
The consensus mark for NII suggests a 45.9% jump from the prior-year reported number to $693 million. Management expects NII (including PPP) to increase 21% sequentially.
Fee Income: The fading stimulus, rising rates and high inflation are expected to have increased card use and fees in the quarter. However, elevated activity from stimulus payments during the prior year is likely to have presented tough comps for Comerica’s card fees (a major contributor to fee income) in the third-quarter 2022. The Zacks Consensus Estimate of $69 million for card fees calls for a 4.2% fall from the prior-year reported number.
Also, the consensus estimate of $28.3 million for commercial lending fees suggests an 8.7% decline from the year-ago reported figure.
With customers utilizing balances to fund business activities, deposit growth slowed in the quarter. The company noted average deposits of $74.7 billion as of August end, down 3.7% sequentially. This is likely to have affected revenues from service charges on deposits. Nonetheless, the Zacks Consensus Estimate for service charges on deposit is pegged at $50 million, suggesting no change from the year-ago reported figure.
The consensus estimate of $266 million for overall fee income suggests a 5% decline from the year-ago reported figure.
Expenses: The company has been investing in its technology platform, owing to its business initiatives. It is expected to have incurred higher expenses due to rising salaries on account of inflation. Such rising costs are expected to have weighed on its expense base to some extent in the quarter under review and hinder bottom-line growth.
Asset Quality: With loan growth, expectations of a worsening macroeconomic outlook and growing recession fears, CMA is expected to have set aside more money to cover expected loan losses in the third quarter. In second-quarter 2022, the company increased the allowance for credit losses by $10 million to $609 million. The increasing momentum is expected to have continued in the third quarter as well.
Now, let’s have a look at what our quantitative model predicts:
The chances of Comerica’s earnings beating the Zacks Consensus Estimate in the third quarter are high. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — that are required 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: Comerica has an Earnings ESP of +0.13%.
A few finance stocks, which you may want to consider, as these too have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Associated Banc-Corp (ASB - Free Report) and BankUnited (BKU - Free Report) .
Associated Banc-Corp is scheduled to release third-quarter 2022 earnings on Oct 20. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.57%.
The Earnings ESP for BKU is +1.32% and the company carries a Zacks Rank #3 at present. BKU is slated to report third-quarter 2022 results on Oct 20.
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Rising Loans, Rates to Support Comerica's (CMA) Q3 Earnings
Comerica Incorporated (CMA - Free Report) is scheduled to report third-quarter 2022 results before the opening bell on Oct 19. The bank’s revenues are likely to have increased from the year-ago reported figure, while earnings are projected to have remained flat.
Comerica’s better-than-expected earnings for second-quarter 2022 reflected high total loan balances and a significant decrease in non-performing assets. However, high expenses were undermining factors.
CMA has a decent surprise history. Its earnings surpassed estimates in three of the trailing four quarters and missed in the other, the average beat being 5.99%.
Comerica Incorporated Price and EPS Surprise
Comerica Incorporated price-eps-surprise | Comerica Incorporated Quote
CMA’s activities in the to-be-reported quarter were adequate to instill analysts’ confidence in the stock. Evidently, the Zacks Consensus Estimate of $2.57 for third-quarter earnings has been revised marginally upward in the past week. The estimate indicates a 35.3% rise from the year-ago quarter’s reported figure. The consensus estimate for revenues is pegged at $961.5 million, suggesting growth of 27.4% from the year-ago reported number.
Factors at Play
Net Interest Income (NII): While lending activity improved sequentially in the third quarter, the pace of loan growth across most categories slowed as the quarter progressed. Per the Fed’s latest data, residential real estate loans and consumer loans slightly moderated in the third quarter from the second quarter.
Commercial real estate loans, as well as commercial and industrial loan growth, accelerated in the quarter under review. This is likely to have aided the company’s third-quarter performance as the majority of its loan portfolio comprises commercial and commercial mortgage loans.
In mid-September, CMA provided an update at a conference, stating that as of August end, average loans stood at $50.9 billion, increasing $900 million on a sequential basis. With strong loan pipelines, the company is anticipated to have ended the quarter with higher loan balances.
Decent lending aside, higher interest rates are expected to have supported CMA’s NII. In the third quarter, the Fed hiked interest rates by 150 basis points. This is likely to have had a favorable impact on CMA’s net interest margin and NII.
The consensus mark for NII suggests a 45.9% jump from the prior-year reported number to $693 million. Management expects NII (including PPP) to increase 21% sequentially.
Fee Income: The fading stimulus, rising rates and high inflation are expected to have increased card use and fees in the quarter. However, elevated activity from stimulus payments during the prior year is likely to have presented tough comps for Comerica’s card fees (a major contributor to fee income) in the third-quarter 2022. The Zacks Consensus Estimate of $69 million for card fees calls for a 4.2% fall from the prior-year reported number.
Also, the consensus estimate of $28.3 million for commercial lending fees suggests an 8.7% decline from the year-ago reported figure.
With customers utilizing balances to fund business activities, deposit growth slowed in the quarter. The company noted average deposits of $74.7 billion as of August end, down 3.7% sequentially. This is likely to have affected revenues from service charges on deposits. Nonetheless, the Zacks Consensus Estimate for service charges on deposit is pegged at $50 million, suggesting no change from the year-ago reported figure.
The consensus estimate of $266 million for overall fee income suggests a 5% decline from the year-ago reported figure.
Expenses: The company has been investing in its technology platform, owing to its business initiatives. It is expected to have incurred higher expenses due to rising salaries on account of inflation. Such rising costs are expected to have weighed on its expense base to some extent in the quarter under review and hinder bottom-line growth.
Asset Quality: With loan growth, expectations of a worsening macroeconomic outlook and growing recession fears, CMA is expected to have set aside more money to cover expected loan losses in the third quarter. In second-quarter 2022, the company increased the allowance for credit losses by $10 million to $609 million. The increasing momentum is expected to have continued in the third quarter as well.
Now, let’s have a look at what our quantitative model predicts:
The chances of Comerica’s earnings beating the Zacks Consensus Estimate in the third quarter are high. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — that are required 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: Comerica has an Earnings ESP of +0.13%.
Zacks Rank: Comerica currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Stocks Worth a Look
A few finance stocks, which you may want to consider, as these too have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Associated Banc-Corp (ASB - Free Report) and BankUnited (BKU - Free Report) .
Associated Banc-Corp is scheduled to release third-quarter 2022 earnings on Oct 20. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.57%.
The Earnings ESP for BKU is +1.32% and the company carries a Zacks Rank #3 at present. BKU is slated to report third-quarter 2022 results on Oct 20.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.