People's United Financial Inc. PBCT is scheduled to report first-quarter 2015 results on Thursday, Apr 16, before the market opens.
Last quarter, this financial savings and loan institution witnessed a 10% year-over-year rise in earnings, while at the same time managing to beat estimates. Higher revenue, lower expenses, and an appreciable rise in loan and deposit balances acted as major positives. However, increased provision was on the downside.
Will People's United impress in the upcoming release after combating the challenges witnessed by the industry in the quarter? Let's see what factors might have influenced the earnings report this time around.
Factors to Influence Q1 Results
Ongoing recovery in the macroeconomic environment has triggered activities in the banking and financial domain. There has been a surge in refinance applications as mortgage rates dropped during the quarter, signaling a rise in mortgage income. Further, increased volatility in the global financial markets is expected to boost investment management business. At the same time, commercial real estate and lending activities are slated to benefit from the improving economy.
Expecting the aforementioned factors to positively impact the performance of the company’s Commercial Banking, and Retail and Business Banking segments, we remain optimistic about People’s United’s revenue growth. Further, as stated by the company during its fourth-quarter earnings call conference, growth in net interest income from its originated portfolio exceeding lost accretion on the acquired portfolio will likely continue to be a driving factor for subsequent quarters.
However, net interest margin is predicted to remain under pressure, owing to lower yield on new loans, given the current low rate environment.
Further, the quarterly results are anticipated to be hit by elevated expenses led by seasonal costs including payroll taxes and winter-related operating expenses. Additionally, the company’s focus on consolidation and closure of certain existing branches, along with the opening of new ones, will likely pump up costs. Besides, compliance with regulatory reforms can further strain the bottom-line expansion.
Moreover, we expect to witness a rise in provisions during the quarter as a safeguard against a potential increase in loan delinquencies, since the company has been rapidly growing and diversifying its loan portfolio.
Activities of People's United during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter remained stable at 20 cents per share over the last 7 days.
Earnings Whispers
Our proven model does not conclusively show that People's United is likely to beat the Zacks Consensus Estimate in the first 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 People's United is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 20 cents.
Zacks Rank: People's United’s Zacks Rank #3 (Hold) increases the predictive power of ESP. But we also need to have a positive ESP 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:
The earnings ESP for The Goldman Sachs Group, Inc. GS is +3.16% and it carries a Zacks Rank #3. The company is scheduled to release its first-quarter results on Apr 16.
Fifth Third Bancorp FITB has an Earnings ESP of +2.70% and carries a Zacks Rank #3. It is scheduled to report results on Apr 21.
BOK Financial Corp. BOKF has an Earnings ESP of +0.96% and a Zacks Rank #3. It is slated to report results on Apr 29.
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