Comerica Incorporated (CMA) is scheduled to report its third-quarter 2014 results on Oct 17, before the market opens.
Last quarter, this major regional bank reported earnings per share of 80 cents, comfortably beating the Zacks Consensus Estimate by 5.3%. Results reflected a decline in both operating expenses and provision for credit losses. Improving credit quality and sturdy balance sheet position acted as tailwinds.
In the four trailing quarters, Comerica posted an average surprise of 5.1%.
Will Comerica be able to keep the earnings streak alive? Let us see how things have shaped up for this announcement.
Factors to Influence Q3 Results
Sluggish macro economic conditions resulting in a decline in consumer and business spending, have adversely affected the non-interest income of Comerica over the last few quarters. In our opinion, lower non-customer driven income will lead to a moderate decline in non-interest income, going forward.
With the industry already facing a stiff challenge, persistent low-rate environment, increased regulations, strict capital norms and rising compliance costs might act as major dampeners in the coming quarters.
However, Comerica’s profit improvement plan, which aims at lowering expenses, will generate improved operational efficiency. This, in turn, will likely support the company’s bottom line, going forward.
Moreover, Comerica’s credit quality is expected to improve. With the overall economic recovery (albeit slow), provision for credit losses would likely decrease in the quarter.
Nevertheless, Comerica’s activities during the quarter were not sufficient to win analysts’ confidence. As a result, the Zacks Consensus Estimate declined by a penny to 81 cents per share over the last 7 days.
Earnings Whispers
Our proven model does not conclusively show that Comerica is likely to beat the Zacks Consensus Estimate in the third quarter. That 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 Comerica is -1.24%. This is because the Most Accurate estimate of 80 cents is below the Zacks Consensus Estimate of 81 cents per share.
Zacks Rank: Comerica’s Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise call.
Stocks That Warrant a Look
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:
Capital One Financial Corporation (COF) has an Earnings ESP of +2.08% and carries a Zacks Rank #2. It is scheduled to report results on Oct 16.
Arlington Asset Investment Corp. (AI) has an Earnings ESP of +7.34% and carries a Zacks Rank #1. It is scheduled to report results on Oct 27.
CIT Group Inc. (CIT) has an Earnings ESP of +3.37% and a Zacks Rank #3. It is slated to report results on Oct 28.
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