With the big banks giving us an impressive start to the third-quarter earnings release, we remain optimistic about the earnings picture for the sector as a whole. Despite the challenging industry landscape since the beginning of 2016, banks have displayed a decent performance during the first half of 2016 and this trend is expected to have continued in the third quarter too.
Specifically, banks’ encouraging performance for the third quarter is likely to stem from anticipated rise in trading revenues, aided by strength in fixed income and revenues. Given the recovery in oil prices, the need for provisions is likely to be lower than the first half of 2016. Further, cost-containment measures should bolster bottom-line growth.
Notably, per our latest Earnings Preview report, overall earnings for the Finance sector, of which banks constitute a major part, are expected to rise 8.5% year over year in third-quarter 2016.
In fact, economies of some of the regions look favorable for their resident banks. So, these banks might be able to deal with the broader issues amid a rising rate environment. This is because the primary source of revenues for small regional banks is interest income. One such region is the Southeast.
The economy of the Southeast region is dependent on tourism, automobile industry, technology firms and financial services. The regional economy has been showing signs of revival since the 2008 financial crisis. This has placed the Southeast region’s banks on a growth path, with a rise in demand for loans. Also, their financials will get a boost from the improving asset quality and decrease in delinquent loans.
Here is a list of few Southeast banking stocks, scheduled to announce their earnings tomorrow.
Synovus Financial Corporation SNV is likely to beat on earnings estimates in the third quarter as the company has a Zacks Rank #3, with an Earnings ESP of 2.00%. You can see the complete list of today’s Zacks #1 Rank(Strong Buy) stocks here.
The Zacks Consensus Estimate of 50 cents per share for the third quarter has remained steady over the past 30 days and reflects a year-over-year growth of 18.8%
Also, the company has a decent earnings surprise history.
Hancock Holding Company HBHC has been witnessing upward revisions lately, ahead of its third-quarter earnings release. The Zacks Consensus Estimate of 58 cents per share reflects a year-over-year growth of nearly 11%.
However, with an Earnings ESP of -3.45% and a Zacks Rank #2 (Buy), it is difficult to predict an earnings beat for Hancock Holding in the upcoming release. Though a Zacks Rank #2 increases the predictive power of an earnings beat, we also need a positive Earnings ESP to be sure of the same.
Notably, the earnings surprise history for Hancock Holding bank has been fairly decent.
HANCOCK HLDG CO Price and EPS Surprise
Pinnacle Financial Partners Inc.’s PNFP Zacks Consensus Estimate has been constant over the last 30 days for the third quarter. Our estimate of 79 cents per share for the upcoming release reflects a year-over-year growth of 18.94%.
Nonetheless, the company has a Zacks Rank #3 (Hold), with an Earnings ESP of 0.00%, making it difficult to conclusively predict an earnings beat this quarter.
Yet, Pinnacle Financial has a decent earnings surprise history as indicated by the chart below:
Regions Financial Corporation’s RF Zacks Consensus Estimate has been constant over the last 30 days for the third quarter. Our estimate of 21 cents per share for the upcoming release reflects a year-over-year growth of 12.41%.
However, the company has a Zacks Rank #3, with an Earnings ESP of 0.00%, making it difficult to conclusively predict earnings beat this quarter.
Notably, the company has a decent earnings surprise history.
REGIONS FINL CP Price and EPS Surprise
The third quarter Zacks Consensus Estimate for Signature Bank SBNY has declined marginally over the last 30 days. Our estimate of $2.03 per share for the upcoming release reflects a year-over-year growth of 8.19%.
Nonetheless, the company’s Zacks Rank #4 (Sell), which when combined with a negative ESP of 1.48%, makes an earnings beat unlikely.
We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
However, the company has displayed a decent earnings surprise history.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Zacks Investment Research