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Will PNC Financial (PNC) Miss on Q3 Earnings Estimates?


The PNC Financial Services Group, Inc. PNC is scheduled to report third-quarter 2016 results on Friday, Oct 14, 2016.

In second-quarter 2016, the Pennsylvania-based company handily beat the Zacks Consensus Estimate. However, the bottom line declined 3% year over year. Better-than-expected results were aided by increased net interest income and relatively stable expenses, partially offset by lower non-interest income. However, energy related headwinds persisted, leading to higher provisions.

PNC Financial delivered an earnings beat in three of the trailing four quarters with an average positive earnings surprise of 3.5%.

Over the past three months, PNC Financial gained more than 10%.

PNC FINL SVC CP Price and EPS Surprise

PNC FINL SVC CP Price and EPS Surprise | PNC FINL SVC CP Quote

Will the rally in stock price continue post third-quarter earnings release? Notably, our quantitative model doesn’t call for an earnings beat this time. Also, the Zacks Consensus Estimate of $1.78 per share for the third quarter indicates a year-over-year decline of more than 6%.

Here is what our model indicates:

Our proven model does not conclusively show that PNC Financial is likely to beat the Zacks Consensus Estimate in the upcoming release. This is because a stock needs to have the right combination of the two key criteria – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) – for greater chances of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Unfortunately, this is not the case here, as elaborated below.

Zacks ESP: The Earnings ESP for PNC Financial is 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at $1.78.

Zacks Rank: PNC Financial’s Zacks Rank #2 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of a positive earnings surprise.

What Management Expects in Q3?

PNC Financial’s NII is expected to remain stable sequentially in third-quarter 2016.

Also, fee income is expected to remain flat as continued growth in business activity in the third quarter is likely to be offset to some extent by elevated corporate services and residential mortgage fees recorded in the second quarter.

Regarding mortgage activity, management expects modest increase in production and the origination.

Non-interest expense is projected to remain stable as well with continued investments in technology and infrastructure.

Further, provision is projected within $100–$150 million.

Period-end loans are projected to rise modestly during the quarter.

PNC Financial’s activities during the quarter were inadequate to win analysts’ confidence. As a result, over the last seven days, the Zacks Consensus Estimate for the quarter remained unchanged at $1.78.

Stocks that Warrant a Look

Here are some stocks worth considering, as they have the right combination of elements to post an earnings beat this quarter.

Synovus Financial Corp. SNV has an Earnings ESP of +2.00% and carries a Zacks Rank #3. It is scheduled to report results on Oct 18.

BlackRock, Inc. BLK has an Earnings ESP of +0.79% and carries a Zacks Rank #2. The company is slated to release results on Oct 18.

Raymond James Financial, Inc. RJF has an Earnings ESP of +2.04% and carries a Zacks Rank #2. The company is slated to release results on Oct 26.

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