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Is Zions (ZION) Likely to Beat Estimates in Q1 Earnings?

Zacks

We expect Zions Bancorporation ZION to beat earnings expectations when it reports first-quarter 2017 results on Apr 24, after the market closes.

Last quarter, Zions’ earnings surpassed the Zacks Consensus Estimate, primarily driven by higher revenues and a marginal fall in expenses. However, deteriorating asset quality was a headwind.

Despite the earnings beat and an improving operating environment, shares of the company fell nearly 3% in the last three months (ended Mar 31).

Additionally, Zions’ activities during the first quarter were not enough to win analysts' confidence. In the last seven days, the Zacks Consensus Estimate remained stable at 54 cents. However, the estimate reflects a year-over-year improvement of 42.3%.

Notably, Zions has a decent earnings surprise history, as is evident from the chart below:

Zions Bancorporation Price and EPS Surprise

Zions Bancorporation Price and EPS Surprise | Zions Bancorporation Quote


Why a Likely Positive Surprise?

Our proven model indicates that chances of Zions beating the Zacks Consensus Estimate this time are high. This is because, it has the right combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: The Earnings ESP for Zions is +1.85%. This is because the Most Accurate estimate of 55 cents is above the Zacks Consensus Estimate of 54 cents.

Zacks Rank: Zions carries a Zacks Rank #3. This increases the predictive power of ESP.

Factors to Influence Q1 Results

Management expects net interest margin (NIM) to benefit from the Dec 2016 rate hike. Moreover, we believe that increasing yields and growth in investment securities portfolio will boost margins to some extent in the to-be-reported quarter.

This should also have some positive impact on net interest income (NII) in the first quarter. However, this might be partially offset by a slowdown in loan growth witnessed in the quarter.

Zions has been undertaking several initiatives to control costs. Though its cost-saving efforts are likely to reduce operating expenses to some extent, the company’s continued spending on technology systems overhaul and normal salary adjustments will keep overall expenses stable during the quarter.

Zions’ oil and gas-related exposure (9.2% of net loans) remains a matter of concern, despite a recovery in oil prices. Though the company expects energy-related losses to be lower year over year, oilfield services portfolio is likely to hamper significant improvement in asset quality. Hence, overall provisions should remain elevated during the quarter.

Other Stocks That Warrant a Look

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

Ameriprise Financial, Inc. AMP is slated to release results on Apr 24. It has an Earnings ESP of +0.79% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

T. Rowe Price Group, Inc. TROW has an Earnings ESP of +0.84% and a Zacks Rank #3. The company is slated to release results on Apr 25.

Lazard Ltd LAZ is scheduled to release results on Apr 27. It has an Earnings ESP of +6.41% and a Zacks Rank #2.

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