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What's in Store for PNC Financial (PNC) in Q2 Earnings?

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The PNC Financial Services Group (PNC - Free Report) is scheduled to report second-quarter 2018 results on Jul 13, before the opening bell. Its revenues and earnings are projected to grow year over year.

In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate. Results benefited from an improvement in net interest income as well as non-interest income, partially offset by higher expenses.

Moreover, PNC Financial has an impressive earnings surprise history. It has surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 2.6%.

However, activities of the company in the to-be-reported quarter were not adequate to win analysts’ confidence. As a result, its Zacks Consensus Estimate for earnings of $2.58 has been revised marginally downward over the past 30 days. Nonetheless, the figure reflects year-over-year improvement of 22.9%.

Notably, the company’s price performance in the past three months has not been impressive. Its shares have lost 5.3% compared with 0.4% decline of the industry.

Now, before we take a look at what our quantitative model predicts, let’s discuss the factors that are likely to impact PNC Financial’s second-quarter results.

Factors to Impact Q2 Results

Net Interest Income to Improve: The second quarter has witnessed a modest improvement in commercial as well as consumer lending. Also, the company’s Zacks Consensus Estimate for average interest-earning assets of $331.4 billion for the to-be-reported quarter reflects growth of 2.3% year over year. Thus, given the improvement in the lending scenario PNC Financial’s net interest income (NII) is expected to improve while flattening of yield curve will likely somewhat hurt.

Management expects NII to grow in the low-single digit, on a sequential basis.

Also, the Zacks Consensus Estimate for NII for the second quarter is $2.4 billion, which reflects an improvement of 6.2% year over year.

Non-Interest Income to Rise: Although the performance of the equity markets was not very impressive during the second quarter, the company’s asset management revenues are expected to witness a rise, supported by higher earnings from its equity investment in BlackRock. Consensus estimates for asset management revenues are $459 million, which reflects growth of 15.3% year over year.

Moreover, given the continued momentum in customer activity, in terms of using credit and debit cards, PNC Financial’s consumer services revenues are likely to improve. The Zacks Consensus Estimate for consumer services revenues of $372 million reflects growth of 3.3% year over year.

Further, the Zacks Consensus Estimate for corporate services revenues is $471 million, reflecting year-over-year growth of 8.5%. Also, estimates for service charges on deposits are $174 million, reflecting 2.4% rise on a year-over-year basis.

Additionally, despite a slowdown in refinancing activities during the quarter under review, due to the continued rise in rates, mortgage originations were decent. Thus, residential mortgage revenues are also expected to witness a modest improvement. The Zacks Consensus Estimate for the same is $106 million, reflecting growth of 1.9% year over year.

With the improvement in all components of fee income, total non-interest income is expected to rise. The Zacks Consensus Estimate for non-interest income is $1.8 billion, indicating 1.4% rise on a year-over-year basis.

Thus, given the rise in both NII as well as fee income, total revenues are likely to improve. The Zacks Consensus Estimate for sales for the second quarter is $4.3 billion reflecting an improvement of 4.7% year over year.

Controlled Expenses: While management expects non-interest expenses to be up by low-single digits on a sequential basis, the company’s continued efforts toward its cost-saving program is likely to keep overall expenses under control.

Now, let’s have a look at what our quantitative model predicts:

According to our quantitative model, chances of PNC Financial beating the Zacks Consensus Estimate in the second quarter are low. This is because it does not have the right combination of the two key ingredients — a 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 Earnings ESP for PNC Financial is -0.23%.

Zacks Rank: PNC Financial currently carries a Zacks Rank of 3. While this increases the predictive power of ESP, we also need a positive ESP to be confident of an earnings beat.

Stocks to Consider

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

Comerica Incorporated (CMA - Free Report) is scheduled to release results on Jul 17. It has an Earnings ESP of +1.60% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Blackstone Group L.P. (BX - Free Report) is slated to release results on Jul 19. It has an Earnings ESP of +6.86% and carries a Zacks Rank #3.

E*TRADE Financial Corporation (ETFC - Free Report) has an Earnings ESP of +0.08% and carries a Zacks Rank of 3. The company is also slated to release results on Jul 19.

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