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Will Rising Rates Support Huntington (HBAN) Q2 Earnings?

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Huntington Bancshares (HBAN - Free Report) is scheduled to report second-quarter 2018 results on Jul 25, before the opening bell. The company’s results are projected to reflect year-over-year growth in revenues and earnings.

In the last reported quarter, the company’s earnings were in line with the Zacks Consensus Estimate. Higher revenues, continued growth in both loan and deposit balances, and lower provisions were among the positives. Further, lower expenses were another tailwind.

Huntington has a decent earnings surprise history, with an average positive surprise of 3.26%.

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

Rising interest rates might have worked in favor too. Though a 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 $1.13 billion for revenues indicates a 5.6% year-over-year improvement.

Other factors That Might Influence Q2 Results

Revenues to Grow: Revenues are expected to grow in line with the company’s long-term financial goals, including Huntington’s accomplishment of its core strategies. Notably, total revenues for full-year 2018 are projected to be up in the range of 4-6%, the impact of which is expected to be reflected in the to-be-reported quarter results.

Rise in Net Interest Income: In addition to higher interest rates, a moderate improvement in lending — particularly in the areas of commercial and industrial, and consumer — might have perked 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 might have been recorded given the reduction in problem assets and credit costs, and volatility in the commodities and currency market. Notably, net charge-offs will likely 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 have impacted 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 will likely be reflected in the April-June quarter results.

Here is what our quantitative model predicts:

According to our proven model, we cannot conclusively predict if Huntington will likely beat estimates 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 -1.20%.

Zacks Rank: Huntington currently carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP. However, we also need a positive ESP to be confident of an earnings beat.

Activities of Huntington during the second 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 29 cents. Nevertheless, it reflects a year-over-year jump of 11.5%.

Stocks that Warrant a Look

Here are some 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 +1.26% and the stock carries a Zacks Rank of 2. The company is scheduled to release Q2 results on Jul 26. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cullen/Frost Bankers, Inc. (CFR - Free Report) has an Earnings ESP of +0.89% and holds a Zacks Rank of 2. It is slated to report results on Jul 26.

Legg Mason, Inc. (LM - Free Report) has an Earnings ESP of +1.22% and carries a Zacks Rank #3. It is set to report June quarter-end results on Jul 25.

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