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Will Comerica (CMA) Keep Earnings Beat Streak Alive in Q4?

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Comerica Incorporated (CMA - Free Report) is scheduled to report fourth quarter and 2018 results before the opening bell on Jan 16. Its revenues and earnings are expected to grow year over year.

The company’s third-quarter results reflected rise in revenues. Also, a strong capital position and improvement in credit quality were the other positives. However, fall in deposits and higher expenses were the key headwinds.

Notably, the company boasts an impressive earnings surprise history. It surpassed earnings estimates in each of the trailing four quarters, the average positive surprise being 7.6%.

Comerica Incorporated Price and EPS Surprise

 

To know whether Comerica will be able to keep its earnings beat streak alive in the to-be-reported quarter as well, let’s take a look at what our quantitative model predicts:

Our proven model shows that Comerica has 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 Earnings ESP for Comerica is +0.63%.

Zacks Rank: The company currently carries a Zacks Rank of 3.

Notably, the Zacks Consensus Estimate of $1.66 for the quarter’s earnings has been revised slightly upward over the past 30 days. Also, it reflects growth of 50% year over year.

Factors to Drive Results

Net Interest Income (NII) to Exhibit Slight Growth: Moderate loan growth during the quarter, particularly in commercial and industrial, and consumer portfolios, will lend some support to Comerica’s interest income growth.

Also, NII is likely to improve, supported by expanding net interest margin. However, flattening of yield curve witnessed during the quarter will likely offset the benefit to some extent.

Further, the Zacks Consensus Estimate for average earning assets of $66 billion for the fourth quarter indicates slight year-over-year decline.

Rise in Non-Interest Income: Comerica’s GEAR Up initiatives are likely to support rise in fee income in the to-be-reported quarter as well by driving growth in treasury management and card fees, along with fiduciary income.

Also, as customer spending remained decent during the quarter, the company is likely to record higher credit and debit cards fees. However, muted investment banking performance is expected to partially offset the benefits.

Therefore, given expectations of rise in both NII and fee income, total revenues are likely to increase. The consensus estimate for sales for the fourth quarter is $864.3 million, reflecting an improvement of 4.1% year over year.

Controlled Expenses: The company is likely to have been successful in keeping expenses controlled with its GEAR Up initiatives. However, some impact of technological investment and restructuring charges is likely to persist.

Credit Quality to Improve: The quarter witnessed strong credit quality trends backed by an improving economy. Also, the consensus estimate shows nearly 43% decline in non-performing assets and loans, on a year-over-year basis.

Other Stocks to Consider

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

U.S. Bancorp (USB - Free Report) is slated to release results on Jan 16. It has an Earnings ESP of +0.26% and currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

M&T Bank Corporation (MTB - Free Report) is scheduled to release results on Jan 17. It has an Earnings ESP of +0.80% and a Zacks Rank #3.

Zions Bancorporation (ZION - Free Report) has an Earnings ESP of +0.75% and it currently carries a Zacks Rank of 3. The company is slated to release results on Jan 22.

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