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Why an Earnings Beat is Likely for M&T Bank (MTB) in Q1

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M&T Bank Corporation (MTB - Free Report) is scheduled to report first-quarter 2018 results on Apr 16, before the opening bell. The company’s revenues and earnings are expected to improve from the year-ago quarter.

The bank’s bottom line is expected to benefit from lower tax rates as it is likely to have retained a remarkable part of its revenues. Also, improvements in the lending scenario and a rise in consumer confidence were some other positives. Further, heightened volatility during the quarter due to U.S.-China trade war tensions is expected to have boosted the top line. The Zacks Consensus Estimate for revenues of $1.42 billion indicates a 4.5% year-over-year improvement.

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

M&T Bank’s fourth-quarter 2017 results were supported by higher revenues along with lower provisions for credit losses. The company also surpassed the Zacks Consensus Estimate due to these factors. However, rise in expenses was a negative.

The bank delivered positive earnings surprises in three of the trailing four quarters, with an average beat of 4.8%.

Over the past year, shares of M&T Bank have gained 27.3%, outperforming 22.1% 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 first 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 +0.15%.

Zacks Rank: M&T Bank carries a Zacks Rank #2 (Buy). 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 27.4% from the prior-year quarter to $2.74.

Factors to Influence Q1 Results

Net Interest Income (NII) to Improve: The quarter witnessed a moderate improvement in the lending scenario primarily due to rise in consumer confidence and increase in loan demand to some extent, owing to the tax reform. Thus, loan growth combined with a rise in interest rates are likely to boost M&T Bank’s NII.

Relatively Stable Fee Income: The first quarter was exceptionally good for trading activities due to increased volatility, thanks to escalated tariff tensions between the United States and China, rise in prices of necessities and a sharp sell-off in the tech sector. Further, rise in advisory and underwriting fees on the back of higher M&A activities and equity issuances are likely to provide some support its top line.

However, the debt originations remained low during the quarter and the related fees are expected to remain muted. Also, with the rising interest rate environment, no major help is expected from the mortgage banking segment. As refinancing activities slowed down during the quarter, mortgage banking 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. Also, M&T Bank witnessed increase in compensation expenses in the first quarter.

Activities of M&T Bank during the quarter were adequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter has been revised nearly 1% upward over the last seven days.

Other Stocks to Consider

Here are a few finance stocks that you may want to consider, as these have the right combination of elements to post an earnings beat this quarter, according to our model.

Comerica Incorporated (CMA - Free Report) is scheduled to release results on Apr 17. It has an Earnings ESP of +0.93% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BB&T Corporation (BBT - Free Report) is slated to release results on Apr 19. It has an Earnings ESP of +1.37% and carries a Zacks Rank of 3.

The Bank of New York Mellon Corporation (BK - Free Report) has an Earnings ESP of +1.81% and carries a Zacks Rank of 3. The company is also slated to release results on Apr 19.

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