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Why an Earnings Beat is Likely for Comerica (CMA) in Q2


Comerica Incorporated CMA is scheduled to report second-quarter 2018 results before the opening bell on Jul 17. Its revenues and earnings are expected to grow year over year.

Before we discuss why an earnings beat might also be in store, let’s take a look at how the company performed in the last reported quarter.

Comerica’s first-quarter 2018 results reflected rise in revenues. Also, a strong capital position and improving credit quality were the positives. However, higher expenses and a fall in deposits were the key headwinds.

Notably, the company boasts an impressive earnings surprise history. It surpassed earnings estimates in each of the trailing four quarters, with an average positive surprise of 5.2%.

Comerica Incorporated Price and EPS Surprise

Now let’s take a look at what our quantitative model predicts for the to-be-reported quarter:

Our proven model shows that Comerica has the right combination of the two key ingredients —positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase 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.

Zacks ESP: The Earnings ESP for Comerica is +1.60%.

Zacks Rank: The company currently carries a Zacks Rank of 3.

Though estimates for the to-be-reported quarter have been revised slightly downward over the last seven days, the Zacks Consensus Estimate for earnings of $1.62 reflects growth of 43.4% year over year.

Factors to Drive the Results

Net Interest Income (NII) to Rise: Comerica’s net interest income is likely to improve in the to-be-reported quarter supported by expanding net interest margin and a pickup in loan growth, particularly in the areas of commercial and industrial, and consumer.

These benefits might partially be offset by a fall in interest earning assets. The Zacks Consensus Estimate projects a slight decline in average earnings assets balance to $66 billion on a year-over-year basis.

Higher Fee Income: Investment banking performance is expected to be flat during the quarter. Strong equity issuances globally might have been boosted by IPOs and follow-on offerings. So, equity underwriting fees are likely to show improvement. Also, increasing M&As will likely support advisory fees to some extent.

Moreover, given the continued momentum in customer activity, in terms of using credit and debit cards, the company might have recorded higher related fees.

Therefore, given expectations for rise in both NII and fee income, total revenues are likely to increase. The Zacks Consensus Estimate for sales for the second quarter is $831.9 million, reflecting an improvement of 7.2% year over year.

Lower Mortgage Banking Revenues: The company is likely to continue witnessing lower revenues from this division owing to slowdown in refinancing activities caused by rising interest rates.

Credit Quality Might Improve: The quarter continued to witness strong credit quality trends. Also, the consensus estimate shows 34.9% and 33.3% decline in non-performing assets and non-performing loans, respectively, on a year-over-year basis.

Other Stocks to Consider

Here are some other stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around.

BankUnited BKU is slated to release results on Jul 24. The company has an Earnings ESP of +0.55% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

KeyCorp KEY is slated to release results on Jul 19. It has an Earnings ESP of +0.20% and carries a Zacks Rank #3.

State Street Corporation STT has an Earnings ESP of +0.12% and carries a Zacks Rank of 3. The company is also slated to release results on Jul 20.

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