Zions Bancorporation (ZION) is scheduled to release third-quarter 2014 results on Oct 20, after the market closes.
Last quarter, Zions delivered a positive earnings surprise of 21.7% on the back of prudent expense management as well as growth in loans and deposits. However, fall in revenues and higher provision for loan losses acted as the dampeners.
Zions recorded an earnings beat in two out of the trailing four quarters with an average positive surprise of 7.23%.
Will Zions be able to beat earnings estimates this time too or will it disappoint? Let us see how things have developed for this announcement.
Factors Impacting Q3 Results
Though Zions managed to control expenses in the first half of 2014, we expect higher consulting costs related to further upgrade of stress-testing processes as well as higher compliance costs to keep expenses elevated in this quarter. However, the company looks forward to maintaining non-interest expenses at around $1.6 billion annually.
Further, Zions anticipates overall loan growth to be constrained in the upcoming release due to the risky commercial real estate loans. Moreover, Zions’ net interest income should remain pressurized, given the persistent low interest rate environment. FDIC supported loan and low yield loans may further weigh on the company’s net interest income.
Nonetheless, the company’s improving credit quality will work in its favor. Management expects negative provisions in this quarter. Further, consistent growth in deposits is expected to propel revenue generation.
Zions’ activities during the quarter were not adequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate remained unchanged at 45 cents per share over the last 7 days.
Earnings Whispers
Our proven model does not conclusively show that Zions 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 Zions is -4.44%. This is because the Most Accurate estimate of 43 cents is below the Zacks Consensus Estimate of 45 cents.
Zacks Rank: Zions’ 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 a few 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:
The Earnings ESP for Portfolio Recovery Associates Inc. (PRAA) is +0.90% and it has a Zacks Rank #2. The company is slated to report on Oct 29.
CIT Group Inc. (CIT) has an Earnings ESP of +11.36% and holds a Zacks Rank #3. It is scheduled to report on Oct 28.
Discover Financial Services (DFS) has an earnings ESP of +0.75% and a Zacks Rank #2. It is scheduled to report results on Oct 21.
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