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Why a Q4 Earnings Beat Is Likely for M&T Bank (MTB)

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M&T Bank Corporation (MTB - Free Report) is scheduled to report fourth quarter and 2017 results on Jan 18, before the opening bell. The company’s revenues and earnings are expected improve from the year-ago quarter.

Before we discuss why an earnings beat might also be in store, let’s take a look at how the company performed in the prior quarter.

M&T Bank’s third-quarter 2017 results were hurt by lower trading and mortgage revenues along with higher expenses. The company also lagged the Zacks Consensus Estimate due to these factors. However, a decline in provision for loan losses and strong capital position were the tailwinds.

The bank has delivered positive earnings surprises in two of the trailing four quarters, with an average beat of 1.9%.

Over the past year, shares of M&T Bank have gained 16.9%, underperforming 27% growth recorded by the industry.

M&T Bank Corporation Price and EPS Surprise

Will the upcoming earnings release give a boost to M&T Bank’s stock? This depends largely on whether the firm is able to deliver a positive earnings surprise.

Why a Positive Surprise Is Likely

According to our quantitative model, chances of M&T Bank beating the Zacks Consensus Estimate in the fourth quarter are high. This is because it has the right combination of the two key ingredients — positive Earnings ESP and a Zacks Rank #3 (Hold) or better — which is required to increase 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.

Zacks ESP: The Earnings ESP for M&T Bank is +0.45%.

Zacks Rank: M&T Bank carries a Zacks Rank of 3. This, when combined with a positive ESP, makes us reasonably confident of a positive earnings surprise.

Notably, per the consensus estimate, M&T Bank’s earnings for the quarter are expected to increase 19.4% from the prior-year quarter to $2.40.

Factors to Influence Q4 Results

Net Interest Income (NII) to Improve: The quarter witnessed a moderate improvement in lending — particularly in the consumer front. Thus, loan growth combined with a rise in interest rates are likely to boost the company’s NII.

Relatively Stable Fee Income: The investment banking business witnessed improvement in the quarter and trust income is expected to rise, thereby providing some support to overall fee income growth. Strong advisory and underwriting fees on the back of higher debt origination and equity issuances are likely to provide a boost to the top line.

However, the overall volume of M&A has remained low during the quarter and the related fees are expected to decline slightly. Also, with the refinance boom nearing its end, no major help is expected from the mortgage banking segment and hence revenues are not expected to witness much improvement.

Expenses to Trend Higher: Expenses are expected to trend higher in the upcoming release due to the company’s continued investments in several areas including operational infrastructure and technology.

Activities of M&T Bank during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter has remained unchanged over the last seven days.

Other Stocks That Warrant a Look

Here are some other stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around.

BB&T Corporation (BBT - Free Report) has an Earnings ESP of +0.33% and a Zacks Rank #2 (Buy). It is slated to report fourth-quarter and 2017 results on Jan 18. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Bank Of New York Mellon Corporation’s (BK - Free Report) Earnings ESP is +0.16% and it carries a Zacks Rank of 3. The company is expected to release fourth-quarter and 2017 results on Jan 18.

SunTrust Banks (STI - Free Report) has an Earnings ESP of +0.81% and a Zacks Rank of 2. It is scheduled to report results on Jan 19.

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