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Will Controlled Expenses Aid Huntington (HBAN) Q1 Earnings?

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Huntington Bancshares (HBAN - Free Report) is scheduled to report first-quarter 2018 results on Apr 24, before the opening bell. The company’s revenues and earnings are projected to grow year over year.

The company’s first-quarter results are expected to reflect the support from robust organic growth and benefits of strategic moves.

Rising interest rates might have worked in favor too. Though flatter yield curve offsets the benefits to some extent, pressure on Huntington’s net interest margin is likely to ease slightly from the rate hikes. The Zacks Consensus Estimate of $1.10 billion for revenues indicates a 5.5% year-over-year improvement.

Huntington has a decent earnings surprise history, with an average positive surprise of 2.1%.

Last quarter, the company’s earnings were in line with the Zacks Consensus Estimate. Higher revenues, continual growth in both loan and deposit balances, and lower provisions were among the positives. However, elevated expenses were the primary headwind.

Activities of Huntington during the first quarter were inadequate to win analysts’ confidence. Thus, over the last seven days, the Zacks Consensus Estimate for the quarter’s earnings remained unchanged at 28 cents. Nevertheless, it reflects a year-over-year jump of 33.3%.

Notably, Huntington’s fundamental strength has helped its shares gain 3.7% for the three-month period ended Mar 31, 2018, outperforming 2.7% growth recorded by the industry.

Will the stock’s rally continue post first-quarter earnings release? Let’s see how things are shaping up.

Earnings Whispers

According to our proven model, we cannot conclusively predict if Huntington will likely beat the Zacks Consensus Estimate this time. That’s because it doesn’t have the right combination of the two key ingredients — positive Earnings ESP and a Zacks Rank #3 (Hold) or better — 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 company has an Earnings ESP of -0.77%.

Zacks Rank: Huntington currently carries a Zacks Rank #3, which increases the predictive power of ESP. However, we also need a positive ESP to be confident of an earnings beat.

Factors That Might Influence Q1 Results

Revenues to Grow: Revenues are expected to grow in line with the company’s long-term financial goals, including synergies from the FirstMerit acquisition.

Rise in Net Interest Income: In addition to higher interest rates, a moderate improvement in lending — particularly in the areas of commercial and industrial, real estate and consumer — might perk up interest income. Notably, management’s projections of 2018 NIM to remain flat year over year on a GAAP basis as expansion in NIM is anticipated to offset the reduced benefit of purchase accounting is likely to show impact in the quarter to be reported as well.

Credit Quality to Normalize: Overall, credit quality is expected to remain at the current levels. However, in the quarter to be reported, moderate volatility can be recorded given the reduction in problem assets and credit costs, and volatility in the commodities and currency market. Notably, loan loss provisions are likely to gradually normalize and net charge-offs might remain below the long-term target range of 35-55 basis points.

Expenses under Control: Though management remains focused on expense management, we remain apprehensive due to the company’s continued investments in business. However, there were no major outflows related to legal settlements that might impact the firm’s earnings unusually in the to-be-reported quarter. Notably, the company projects non-interest expenses to be down 2-4% in 2018, the impact of which is likely to reflect in the first-quarter results.

Stocks That Warrant a Look

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

The Earnings ESP for SVB Financial Group (SIVB - Free Report) is +1.38% and the stock carries a Zacks Rank of 3. The company is scheduled to release first-quarter results on Apr 26. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cullen/Frost Bankers, Inc. (CFR - Free Report) has an Earnings ESP of +0.31% and carries a Zacks Rank of 3. It is slated to report results on Apr 26.

MB Financial Inc. has an Earnings ESP of +1.82% and carries a Zacks Rank of 3. It is scheduled to report results on Apr 24.

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