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Will Lower Interest Income Mar Comerica's (CMA) Q1 Earnings?

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Comerica Incorporated (CMA - Free Report) is scheduled to report first-quarter 2020 results before the opening bell on Apr 21. The bank’s revenues and earnings are likely to have witnessed a fall from the year-ago reported figures.

The company’s fourth-quarter 2019 results were supported by non-interest income growth, higher deposits and lower provisions.  However, lower loans and rise in expenses were the undermining factors.

Notably, Comerica boasts an impressive earnings surprise history. It surpassed estimates in three of the trailing four quarters, the positive earnings surprise being 2.8%, on average.

Comerica Incorporated Price and EPS Surprise

 

The Zacks Consensus Estimate for earnings for the first quarter is pegged at 77 cents, which suggests a decline of 63% from the year-ago reported number. Also, the consensus estimate for sales of $752.3 million indicates a 10.9% fall.

Factors at Play

Muted Net Interest Income (NII): Per the Fed’s latest data, commercial and industrial, and consumer loans improved year over year in the quarter, which is likely to have supported NII. Also, the Zacks Consensus Estimate for average earning assets of $66.7 billion for the quarter indicates 3.3% year-over-year growth.

However, a decline in interest rates in October 2019 and again in March to near-zero level as a move to protect the economy from the impacts of the coronavirus outbreak are likely to have hurt the company’s net interest margin, thereby, affecting NII.

The Zacks Consensus Estimate of $508 million for NII suggests a 16.2% year-over-year fall.

Higher Fee Income: Comerica’s fee income might have witnessed support from higher service charge on deposit accounts on rise in deposits during the quarter.

Also, consumer spending remained decent in the first quarter, resulting in the usage of debit/credit cards and merchant payment processing services. Thus, card fees (a major contributor to fee income in 2019) might have lent support to the company’s top line in the to-be-reported quarter.

Controlled Expenses: Its GEAR Up initiatives target to keep expenses under control. However, some impacts of technological investment and restructuring charges are likely to have persisted.

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

The chances of Comerica beating the Zacks Consensus Estimate in the first quarter are less. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing 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 -9.59%.

Zacks Rank: Comerica currently has a Zacks Rank #5 (Strong Sell).

Stocks to Consider

Here are some finance stocks that you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model.

CURO Group Holdings Corp. (CURO - Free Report) is slated to release quarterly results on May 4. The company has an Earnings ESP of +1.47% and currently flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Virtu Financial, Inc. (VIRT - Free Report) is scheduled to report quarterly earnings on May 7. The company, which sports a Zacks Rank of 1 at present, has an Earnings ESP of +41.57%.

SB ONE BANCORP (SBBX - Free Report) is likely to report quarterly earnings on Apr 28. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +1.56%.

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