KeyCorp. (KEY) is scheduled to report its third-quarter 2014 results on Oct 15, before the opening bell.
Last quarter, KeyCorp delivered an 8.0% positive earnings surprise on the back of prudent expense management, increased fee income and a fall in provisions, partially offset by a decline in net interest income. Moreover, the company recorded an earnings beat in all the four trailing quarters, with an average surprise of 9.6%.
Will KeyCorp be able to keep the earnings streak alive? Let us see how things have shaped up for this announcement.
Factors to Influence Q3 Results
The overall tough industry background which continued during the quarter will likely pressure revenue growth. Further, we do not expect any remarkable improvement in KeyCorp’s interest income, given the persistent low-rate environment as well as sluggish loan demand. Also, we believe that pressure on net interest margin (NIM) will continue due to low demand for new loan.
In our opinion, KeyCorp’s expense-savings program – ‘Fit for Growth’ – will likely support its bottom line. Additionally, consolidation of branches will aid a reduction in operating expenses.
Moreover, KeyCorp’s credit quality is expected to remain strong. With the overall economic recovery (albeit slow), provision for credit losses would likely decrease in the quarter.
However, KeyCorp’s activities during the quarter were not sufficient to win analysts’ confidence. As a result, the Zacks Consensus Estimate remained unchanged at 26 cents per share over the last 7 days.
Earnings Whispers
Our proven model does not conclusively show that KeyCorp is likely to beat the Zacks Consensus Estimate in the third quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least #2 (Buy) or #3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: The Earnings ESP for KeyCorp is -3.85%. This is because the Most Accurate estimate and the Zacks Consensus Estimate stand at 25 cents and 26 cents, respectively.
Zacks Rank: KeyCorp’s Zacks Rank #3 increases the predictive power of ESP. But we also need to have a positive ESP to be confident of an earnings surprise call.
Stocks to Consider
Here are some finance stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
BB&T Corporation (BBT) has an Earnings ESP of +1.41% and carries a Zacks Rank #3. It is scheduled to report results on Oct 16.
Capital One Financial Corporation (COF) has an earnings ESP of +2.08% and carries a Zacks Rank #2. It is slated to release results on Oct 16.
CIT Group Inc. (CIT) has an earnings ESP of +3.37% and a Zacks Rank #3. It is scheduled to report results on Oct 28.
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