Huntington Bancshares Incorporated (HBAN) is scheduled to report fourth-quarter 2014 results on Thursday, Jan 22, before the market opens.
Huntington managed to deliver a positive earnings surprise of 5.3% in third-quarter 2014. The company’s earnings per share came in at 20 cents, beating the Zacks Consensus Estimate by a penny. Results were supported by top-line growth, although partially offset by higher expenses and increased provision for credit losses. Further, the quarter witnessed growth in both loan and deposit balance.
Will Huntington miss on earnings this quarter? Let’s see how things have shaped up for this announcement.
Factors to Influence Q4 Results
Over the last few quarters, the company’s net interest income (“NII”) is showing an upward trend. The rise was driven by an increase in average earnings assets. Management expects this NII growth to continue in fourth quarter as well, albeit at a modest pace, driven by an expected rise in earnings assets. This expectation of a rise in earning assets is attributable to a predicted moderate increase in total loans.
However, in the third quarter, net interest margin (“NIM”) had declined both on a year over year as well as a sequential basis. Management anticipates this pressure on NIM to persist in fourth quarter too, and this will negatively impact the benefits of higher NII.
Non interest expenses increased both sequentially and year over year in the third quarter, mainly due to higher personnel costs. Excluding one-time items, management estimates the expenses to remain at the current levels in the fourth quarter. Again, non-interest income is projected to remain at the current levels, excluding the impact of any net MSR activity.
Overall, credit quality is expected to improve, with some volatility, on a quarterly basis. NCOs are expected to come within or below the company’s long-term expected normal range of 35–55 basis points.
Activities of Huntington during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter remained stable at 19 cents per share over the last 7 days.
Earnings Whispers
Our proven model does not conclusively show that Huntington is likely to beat the Zacks Consensus Estimate in the fourth 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 Huntington is -5.26%. This is because the Most Accurate estimate of 18 cents stands below the Zacks Consensus Estimate of 19 cents per share.
Zacks Rank: Huntington’s Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we need to have a positive ESP as well to be confident of an earnings surprise call.
Stocks That Warrant a Look
Here are some 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:
Associated Banc-Corp (ASB) has an Earnings ESP of +3.33% and carries a Zacks Rank #3. The company is scheduled to release results on Jan 22.
BancorpSouth, Inc. (BXS) has an Earnings ESP of +3.23% and carries a Zacks Rank #2. It is scheduled to report results on Jan 21.
Janus Capital Group, Inc. (JNS) has an Earnings ESP of +5.00% and a Zacks Rank #3. It is slated to report results on Jan 22.
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