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Will SunTrust (STI) Stock Continue to Rise Post Q2 Earnings?
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SunTrust Banks, Inc. (STI - Free Report) is slated to announce its second-quarter 2016 results on Jul 22, before the opening bell.
Driven by a rise in net interest income, SunTrust’s earnings surpassed the Zacks Consensus Estimate in the first quarter. However, lower non-interest income, a jump in provision for credit losses and a rise in operating expenses were the downsides.
The earnings beat translated into improved stock price movement, as the company’s shares were up more than 11% for the three-month period ended Jun 30, 2016. Analysts too seem to be happy with SunTrust’s business activities in the just concluded quarter.
The company witnessed seven upward revisions in earnings estimates (versus two downward revisions) over the last 30 days. Notably, the Zacks Consensus Estimate of 87 cents remained stable over the last seven days.
Additionally, SunTrust boasts a decent earnings surprise history, as evident from the chart below:
Our proven model does not conclusively show that SunTrust is likely to beat the Zacks Consensus Estimate in the second quarter. This 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 SunTrust is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 87 cents.
Zacks Rank: SunTrust’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 beat.
Factors to Impact Q2 Results
Will SunTrust be able to maintain its earnings streak in this quarter? Or will it succumb to industry-wide challenges? Let’s check the factors at play:
Improvement in NIM to Continue: Driven by the Fed’s rate hike in Dec 2015, SunTrust had witnessed a rise in net interest margin (NIM) in the last quarter. Though the rise in rates expected in June didn’t happen, we believe the company will continue to reap benefits from last year’s rate hike (on a modest basis). So, NIM should continue to trend upward.
Rising Interest Income to Support Revenues: With improving domestic economy, demand for loans is on the rise. So, loan growth and NIM expansion is likely to support interest income growth. Further, improved funding mix should lower interest bearing liability rates. Therefore, all these factors should help increase the company’s net interest income during the quarter.
Effective Expense Control: SunTrust remains undeterred in its efforts to improve efficiency. The company expects expenses to be in $1.30–$1.35 billion range in the second quarter.
Credit Quality to Support Results: Though provision for loan losses is expected to be on the higher side largely led by the company’s energy loan exposure, overall credit quality is anticipated to reflect improvement in the upcoming release.
Lackluster Non-interest Income Performance: Driven by impressive trading activities during the quarter, we believe SunTrust will witness a slight rise in trading income. However, this is likely to be more than offset by lower mortgage production related income (lower level of refinancing activities) and investment banking revenues (as reflected by adverse industry-wide trends).
Stocks That Warrant a Look
Here are a few finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming announcements.
Cullen/Frost Bankers, Inc. (CFR - Free Report) has an Earnings ESP of +0.96% and carries a Zacks Rank #3. It is scheduled to report results on Jul 27.
Federated Investors, Inc. has an Earnings ESP of +2.13% and a Zacks Rank #3. It is slated to report results on Jul 28.
LPL Financial Holdings Inc. (LPLA - Free Report) has an Earnings ESP +2.33% and a Zacks Rank #3. It is scheduled to report results on Jul 28.
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Will SunTrust (STI) Stock Continue to Rise Post Q2 Earnings?
SunTrust Banks, Inc. (STI - Free Report) is slated to announce its second-quarter 2016 results on Jul 22, before the opening bell.
Driven by a rise in net interest income, SunTrust’s earnings surpassed the Zacks Consensus Estimate in the first quarter. However, lower non-interest income, a jump in provision for credit losses and a rise in operating expenses were the downsides.
The earnings beat translated into improved stock price movement, as the company’s shares were up more than 11% for the three-month period ended Jun 30, 2016. Analysts too seem to be happy with SunTrust’s business activities in the just concluded quarter.
The company witnessed seven upward revisions in earnings estimates (versus two downward revisions) over the last 30 days. Notably, the Zacks Consensus Estimate of 87 cents remained stable over the last seven days.
Additionally, SunTrust boasts a decent earnings surprise history, as evident from the chart below:
SUNTRUST BKS Price and EPS Surprise
SUNTRUST BKS Price and EPS Surprise | SUNTRUST BKS Quote
Earnings Whispers
Our proven model does not conclusively show that SunTrust is likely to beat the Zacks Consensus Estimate in the second quarter. This 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 SunTrust is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 87 cents.
Zacks Rank: SunTrust’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 beat.
Factors to Impact Q2 Results
Will SunTrust be able to maintain its earnings streak in this quarter? Or will it succumb to industry-wide challenges? Let’s check the factors at play:
Improvement in NIM to Continue: Driven by the Fed’s rate hike in Dec 2015, SunTrust had witnessed a rise in net interest margin (NIM) in the last quarter. Though the rise in rates expected in June didn’t happen, we believe the company will continue to reap benefits from last year’s rate hike (on a modest basis). So, NIM should continue to trend upward.
Rising Interest Income to Support Revenues: With improving domestic economy, demand for loans is on the rise. So, loan growth and NIM expansion is likely to support interest income growth. Further, improved funding mix should lower interest bearing liability rates. Therefore, all these factors should help increase the company’s net interest income during the quarter.
Effective Expense Control: SunTrust remains undeterred in its efforts to improve efficiency. The company expects expenses to be in $1.30–$1.35 billion range in the second quarter.
Credit Quality to Support Results: Though provision for loan losses is expected to be on the higher side largely led by the company’s energy loan exposure, overall credit quality is anticipated to reflect improvement in the upcoming release.
Lackluster Non-interest Income Performance: Driven by impressive trading activities during the quarter, we believe SunTrust will witness a slight rise in trading income. However, this is likely to be more than offset by lower mortgage production related income (lower level of refinancing activities) and investment banking revenues (as reflected by adverse industry-wide trends).
Stocks That Warrant a Look
Here are a few finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming announcements.
Cullen/Frost Bankers, Inc. (CFR - Free Report) has an Earnings ESP of +0.96% and carries a Zacks Rank #3. It is scheduled to report results on Jul 27.
Federated Investors, Inc. has an Earnings ESP of +2.13% and a Zacks Rank #3. It is slated to report results on Jul 28.
LPL Financial Holdings Inc. (LPLA - Free Report) has an Earnings ESP +2.33% and a Zacks Rank #3. It is scheduled to report results on Jul 28.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>