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Is a Beat in Store for U.S. Bancorp (USB) in Q4 Earnings?
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U.S. Bancorp (USB - Free Report) is scheduled to report fourth-quarter and 2023 results on Jan 17, before the opening bell. The company’s quarterly revenues are expected to have improved year over year, while earnings are projected to have declined.
In the last reported quarter, USB’s earnings surpassed the Zacks Consensus Estimate on higher expenses. Results benefited from increased net interest income (NII), supported by higher interest rates. A rise in non-interest income was another positive. However, higher expenses and provisions were the major headwinds.
U.S. Bancorp has a strong surprise history. Earnings surpassed estimates in the three of the trailing four quarters and missed once, the average beat being 2.71%.
The Zacks Consensus Estimate for fourth-quarter earnings of 99 cents has been unchanged in the past month. Further, the figure indicates a decline of 17.5% from the year-ago reported number.
The consensus estimate for quarterly revenues is pegged at $6.83 billion, suggesting growth of 7.7% from the year-earlier reported figure. Management projects adjusted total revenues between $6.8 billion and $6.9 billion. The outlook includes purchase accounting accretion of $65 million.
Major Factors to Influence U.S. Bancorp’s Q4 Results
Loan Demand & NII: Given the challenging macroeconomic backdrop and high interest rates, banks’ lending activities are likely to have been muted in the fourth quarter. Per the Fed’s latest data, the overall lending scenario was weak. The demand for commercial and industrial, real estate and consumer loans (except credit card loans) was subdued in October and November.
Given U.S. Bancorp's substantial exposure to commercial and real estate loans, the company’s lending book is likely to have been affected.
Hence, moderate loan demand is likely to have negatively influenced USB’s average earning asset balance for the fourth quarter. Notably, the Zacks Consensus Estimate of $600.7 billion for average earning assets indicates a marginal sequential decrease.
Though the Federal Reserve did not raise rates in the quarter, the policy rate stands at a 22-year high of 5.25-5.5% at present. Such high rates are likely to have a positive impact on the company’s NII.
However, an inverted yield curve, deposit migrations and higher funding costs are expected to weigh on NII and margins.
The consensus estimate for NII (taxable-equivalent basis) suggests a 2.8% sequential tumble to $4.14 billion. The company projects NII (taxable-equivalent basis) of $4.1-$4.2 billion.
Non-Interest Income: Market volatility and client activity were subdued in the fourth quarter. While the risks of a recession in the near term faded, ambiguity related to geopolitical issues, inflation and high rates kept investors on the sidelines. These factors led to reduced volatility in equity markets and other asset classes, including commodities, bonds and foreign exchange.
Hence, USB is likely to have recorded a weak performance in trading revenues this time. This is expected to have hindered commercial product revenues.
The Zacks Consensus Estimate for commercial products revenues is pegged at $345 million, suggesting a 1.6% sequential fall.
In the fourth quarter, mortgage rates continued to increase, with the rate on 30-year fixed mortgage reaching 7.31% in September, the highest level in nearly 23 years. The climb in mortgage rates, which kept home buyers on the sidelines, led to a smaller origination market, both purchase and refinancing, than the prior-year quarter.
Hence, U.S. Bancorp is likely to have continued seeing declines in its home lending portfolio and mortgage banking revenues in fourth-quarter 2023. The Zacks Consensus Estimate for USB’s fourth-quarter 2023 mortgage banking revenues is pegged at $140 million, implying a 2.8% fall sequentially.
The Zacks Consensus Estimate for income from card fees is pegged at $411 million, indicating a marginal decline from the prior quarter’s reported figure. Nonetheless, the consensus mark for trust and investment management fees is pegged at $624 million, indicating a sequential rise of 0.4%.
Overall, the Zacks Consensus Estimate for total non-interest income is pegged at $2.69 billion, implying a decline of 2.3% on a sequential basis.
Expenses: As USB continues to invest in digital initiatives, payment capabilities and technology modernization, such costs are likely to have weighed on its expense base to some extent in the to-be-reported quarter. Moreover, higher merger and integration costs, and the negative impacts of MUFG Union Bank’s operating expenses are expected to have increased expenditure. The company anticipates merger and integration charges between $250 million and $300 million.
U.S. Bancorp estimates adjusted non-interest expenses of $4.2 billion. The guidance includes core deposit intangibles amortization related to the Union Bank acquisition of $115 million.
Asset Quality: With an uncertain macroeconomic outlook and slower GDP growth, USB’s credit quality is likely to have deteriorated. Thus, it is expected to have built reserves in the fourth quarter. The Zacks Consensus Estimate for total non-performing assets of $1.4 billion implies a 9.9% rise from the prior quarter’s reported figure.
What the Zacks Model Predicts
Our proven model predicts an earnings beat for U.S. Bancorp this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: U.S. Bancorp has an Earnings ESP of +0.24%.
Zacks Rank: USB currently carries a Zacks Rank of 3.
Other Banks Worth a Look
Here are a couple of other bank stocks that you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat this time around.
Bank OZK (OZK - Free Report) is slated to report fourth-quarter and 2023 results on Jan 18. It has an Earnings ESP of +5.97% and a Zacks Rank #3 at present.
Over the past week, the Zacks Consensus Estimate for OZK’s quarterly earnings per share has moved marginally south to $1.45.
Image: Bigstock
Is a Beat in Store for U.S. Bancorp (USB) in Q4 Earnings?
U.S. Bancorp (USB - Free Report) is scheduled to report fourth-quarter and 2023 results on Jan 17, before the opening bell. The company’s quarterly revenues are expected to have improved year over year, while earnings are projected to have declined.
In the last reported quarter, USB’s earnings surpassed the Zacks Consensus Estimate on higher expenses. Results benefited from increased net interest income (NII), supported by higher interest rates. A rise in non-interest income was another positive. However, higher expenses and provisions were the major headwinds.
U.S. Bancorp has a strong surprise history. Earnings surpassed estimates in the three of the trailing four quarters and missed once, the average beat being 2.71%.
U.S. Bancorp Price and EPS Surprise
U.S. Bancorp price-eps-surprise | U.S. Bancorp Quote
The Zacks Consensus Estimate for fourth-quarter earnings of 99 cents has been unchanged in the past month. Further, the figure indicates a decline of 17.5% from the year-ago reported number.
The consensus estimate for quarterly revenues is pegged at $6.83 billion, suggesting growth of 7.7% from the year-earlier reported figure. Management projects adjusted total revenues between $6.8 billion and $6.9 billion. The outlook includes purchase accounting accretion of $65 million.
Major Factors to Influence U.S. Bancorp’s Q4 Results
Loan Demand & NII: Given the challenging macroeconomic backdrop and high interest rates, banks’ lending activities are likely to have been muted in the fourth quarter. Per the Fed’s latest data, the overall lending scenario was weak. The demand for commercial and industrial, real estate and consumer loans (except credit card loans) was subdued in October and November.
Given U.S. Bancorp's substantial exposure to commercial and real estate loans, the company’s lending book is likely to have been affected.
Hence, moderate loan demand is likely to have negatively influenced USB’s average earning asset balance for the fourth quarter. Notably, the Zacks Consensus Estimate of $600.7 billion for average earning assets indicates a marginal sequential decrease.
Though the Federal Reserve did not raise rates in the quarter, the policy rate stands at a 22-year high of 5.25-5.5% at present. Such high rates are likely to have a positive impact on the company’s NII.
However, an inverted yield curve, deposit migrations and higher funding costs are expected to weigh on NII and margins.
The consensus estimate for NII (taxable-equivalent basis) suggests a 2.8% sequential tumble to $4.14 billion. The company projects NII (taxable-equivalent basis) of $4.1-$4.2 billion.
Non-Interest Income: Market volatility and client activity were subdued in the fourth quarter. While the risks of a recession in the near term faded, ambiguity related to geopolitical issues, inflation and high rates kept investors on the sidelines. These factors led to reduced volatility in equity markets and other asset classes, including commodities, bonds and foreign exchange.
Hence, USB is likely to have recorded a weak performance in trading revenues this time. This is expected to have hindered commercial product revenues.
The Zacks Consensus Estimate for commercial products revenues is pegged at $345 million, suggesting a 1.6% sequential fall.
In the fourth quarter, mortgage rates continued to increase, with the rate on 30-year fixed mortgage reaching 7.31% in September, the highest level in nearly 23 years. The climb in mortgage rates, which kept home buyers on the sidelines, led to a smaller origination market, both purchase and refinancing, than the prior-year quarter.
Hence, U.S. Bancorp is likely to have continued seeing declines in its home lending portfolio and mortgage banking revenues in fourth-quarter 2023. The Zacks Consensus Estimate for USB’s fourth-quarter 2023 mortgage banking revenues is pegged at $140 million, implying a 2.8% fall sequentially.
The Zacks Consensus Estimate for income from card fees is pegged at $411 million, indicating a marginal decline from the prior quarter’s reported figure. Nonetheless, the consensus mark for trust and investment management fees is pegged at $624 million, indicating a sequential rise of 0.4%.
Overall, the Zacks Consensus Estimate for total non-interest income is pegged at $2.69 billion, implying a decline of 2.3% on a sequential basis.
Expenses: As USB continues to invest in digital initiatives, payment capabilities and technology modernization, such costs are likely to have weighed on its expense base to some extent in the to-be-reported quarter. Moreover, higher merger and integration costs, and the negative impacts of MUFG Union Bank’s operating expenses are expected to have increased expenditure. The company anticipates merger and integration charges between $250 million and $300 million.
U.S. Bancorp estimates adjusted non-interest expenses of $4.2 billion. The guidance includes core deposit intangibles amortization related to the Union Bank acquisition of $115 million.
Asset Quality: With an uncertain macroeconomic outlook and slower GDP growth, USB’s credit quality is likely to have deteriorated. Thus, it is expected to have built reserves in the fourth quarter. The Zacks Consensus Estimate for total non-performing assets of $1.4 billion implies a 9.9% rise from the prior quarter’s reported figure.
What the Zacks Model Predicts
Our proven model predicts an earnings beat for U.S. Bancorp this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: U.S. Bancorp has an Earnings ESP of +0.24%.
Zacks Rank: USB currently carries a Zacks Rank of 3.
Other Banks Worth a Look
Here are a couple of other bank stocks that you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat this time around.
Bank OZK (OZK - Free Report) is slated to report fourth-quarter and 2023 results on Jan 18. It has an Earnings ESP of +5.97% and a Zacks Rank #3 at present.
Over the past week, the Zacks Consensus Estimate for OZK’s quarterly earnings per share has moved marginally south to $1.45.
First Horizon Corporation (FHN - Free Report) is scheduled to release fourth-quarter and 2023 earnings on Jan 18. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +4.17%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The consensus estimate for FHN’s quarterly earnings has been unchanged at 31 cents per share over the past 60 days.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.