KeyCorp. (KEY) is scheduled to report its fourth-quarter and full-year 2014 results on Jan 22, before the opening bell.
Third-quarter 2014 earnings per share came in line with the Zacks Consensus Estimate. Results were mainly impacted by decline in revenues, offset by lower expenses and a fall in provision for loan and lease losses.
KeyCorp recorded an earnings beat in three of the trailing four quarters with an average positive surprise of 6.2%.
Is KeyCorp likely to miss on earnings this quarter? Let’s see how things have shaped up for this announcement.
Factors to Influence Q4 Results
Though the first nine months of 2014 reflected muted growth on the revenues front, management expects the top line to pick up momentum this quarter on the back of higher non-interest income. Driven by strong investment banking activities, non-interest income is anticipated in the low double-digit percentage range in the upcoming release.
However, net interest income in this quarter is expected to be relatively at par with the previous quarter figure of $581 million. For 2014, revenue generation is estimated to reflect low single-digit growth, exhibiting a year-over-year improvement.
Further, results this quarter will likely benefit from growth in loans as forecasted by management. With development in commercial lending operations, average loans are projected to rise year over year in the mid-single digit range.
On the expense front, management predicts additional pension settlement charges in the range of $5–$10 million and efficiency charges of around $10 million in this quarter. However, overall expenses are expected to remain almost in level with the third-quarter number of $704 million. For 2014, expenses are estimated to be in the low-to mid-single digits, representing better expense management on a year-over-year basis.
Moving on to the credit quality metrics, net charge-offs are anticipated to remain below the target range of 40 to 60 basis points in the upcoming release owing to favorable economic trends.
Nonetheless, 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 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 KeyCorp is 0.00%. This is because the Most Accurate estimate of 26 cents is at par with the Zacks Consensus Estimate.
Zacks Rank: KeyCorp’s Zacks Rank #3 increases the predictive power of ESP. However, 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:
Ameriprise Financial, Inc. (AMP) has an Earnings ESP of +0.45% and carries a Zacks Rank #3. It is scheduled to report results on Jan 28.
CIT Group Inc. (CIT) has an earnings ESP of +5.38% and carries a Zacks Rank #1. It is slated to release results on Jan 27.
Federated Investors, Inc. (FII) has an earnings ESP of +2.63% and a Zacks Rank #2. It is scheduled to report results on Jan 22.
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