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Will Stable Fee Income Hurt Huntington's (HBAN) Q3 Earnings?

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Huntington Bancshares (HBAN - Free Report) is scheduled to report third-quarter 2018 results on Oct 23, 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 surpassed the Zacks Consensus Estimate. Higher revenues, continued growth in both loan and deposit balances were among the positives. However, higher expenses and provisions were the headwinds.

Huntington has a decent earnings surprise history. Over the trailing four quarters, its earnings surpassed the Zacks Consensus Estimate in one and matched in three, the average beat being nearly 1%.

Huntington Bancshares Incorporated Price and EPS Surprise

 

However, the company’s activities in the third quarter were not able to impress the analysts. As a result, the Zacks Consensus Estimate for earnings of 32 cents remained stable over the past 30 days. Nonetheless, the figure represents year-over-year growth of 28%.

Moreover, the consensus estimate for revenues of $1.16 billion reflects a rise of 6.2% from the prior-year quarter.

Before we take a look at what our quantitative model predicts, let’s check the factors that are expected to impact third-quarter results.

Factors That Might Influence Q3 Results

Net Interest Income Might Record Growth: Moderate improvement in lending — particularly in the areas of commercial and industrial, and consumer — might have perked up interest income.

Rising interest rates might have worked in its favor too. Though a flatter yield curve offsets the benefits to some extent, Huntington’s net interest margin is likely to expand slightly due to the rate hikes.

Also, rise in interest earning assets is likely to have supported top-line growth. The Zacks Consensus Estimate predicts earnings assets of $97.8 billion, up 5.3% year over year.

Fee Income Might Remain Stable: Equity issuances globally might get a boost from IPOs and follow-on offerings, thus increasing the related fees. However, the trend of pocketing solid advisory and underwriting fees for debt issuance may reverse to some extent in the to-be-reported quarter. Thus, investment banking income is expected to remain relatively stable.

Furthermore, with the rising interest rates, 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.

However, given the continued momentum in customer spending, the usage of credit and debit cards is likely to have helped the company record higher related fees.

Expenses Under Control: Management remains focused on expense management, Also, there were no major outflows during the quarter 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 3-4% in 2018, the impact of which will likely be reflected in the July-September 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.

Earnings ESP: The company has an Earnings ESP of -0.24%.

Zacks Rank: Huntington currently carries a Zacks Rank #3.

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 is +1.22% and the stock carries a Zacks Rank #1 (Strong Buy). The company is scheduled to release third-quarter results on Oct 25. 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 +0.07% and holds a Zacks Rank of 3. It is slated to report results on Oct 25.

T. Rowe Price Group (TROW - Free Report) has an Earnings ESP of +0.78% and carries a Zacks Rank #2 (Buy). It is set to report September quarter-end results on Oct 25.

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