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What's in Store for Bank of Montreal (BMO) in Q1 Earnings?

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Bank of Montreal (BMO - Free Report) is slated to announce first-quarter fiscal 2019 (ended Jan 31) results on Feb 26, before the opening bell. Its revenues and earnings are expected to grow year over year.

Rise in revenues and decline in operating expenses supported the company’s results in the last reported quarter.

Notably, the Zacks Consensus Estimate for earnings of $1.70 for the fiscal first quarter shows a 1.2% increase on a year-over-year basis. Also, the consensus estimate for sales is $4.51 billion, reflecting a rise of 0.6%.

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

Factors to Impact Q1 Results

Non-interest revenues to improve: Modest improvement in equity trading activities in November-January quarter will likely support Bank of Montreal’s non-interest revenues. Several developments — including the further escalation of U.S.-China trade war, Brexit-related uncertainty and fears of global economic slowdown — rocked the markets and kept the equity trading desks busy. Nonetheless, soft fixed income trading will likely be an offsetting factor.

Additionally, investment banking will likely marginally offer support. Fears of global economic slowdown and increased volatility weighed on companies’ plans to raise capital by issuing shares. Further, rise in interest rates is likely to have lowered companies’ involvement in debt issuance activities. Thus, underwriting fees are not expected to increase much for Bank of Montreal.

While decline in global M&A deal volume (due to volatile markets and increase in borrowing costs) in the quarter will likely hamper Bank of Montreal’s advisory fees, the strong M&A deal pipeline from the previous quarters will provide modest support.

Further, as deposit balance continues to improve, the company’s deposit and payment service charges are expected to rise in the to-be-reported quarter.

Increase in net interest income: Rise in loan demand and higher interest rates will support Bank of Montreal’s net interest income in the fiscal first quarter.

Slight increase in expenses: Bank of Montreal’s has been facing a rise in operating expenses over the past several quarters. The same trend will likely persist in the to-be-reported quarter as the company continues to invest in technology upgrades.

Additionally, similar to every fiscal first quarter, this time also the company will incur charges related to deferred compensation for employees who are eligible to retire. The company expects this expense to increase modestly on a year-over-year basis.

Earnings Whispers

Now, let’s check what our quantitative model predicts.

According to our quantitative model, it cannot be conclusively predicted if Bank of Montreal will be able to beat the Zacks Consensus Estimate this time. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better — to be confident of an earnings surprise call.

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 Bank of Montreal is 0.00%.

Zacks Rank: Bank of Montreal has a Zacks Rank #3. While this increases the predictive power of ESP, we also need a positive ESP to be confident of an earnings beat.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Schedule of Other Canadian Banks

The Bank of Nova Scotia (BNS - Free Report) is scheduled to report results on Feb 26 while both Canadian Imperial Bank of Commerce (CM - Free Report) and The Toronto-Dominion Bank (TD - Free Report) will report on Feb 28.

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