We expect Hudson City Bancorp, Inc. (HCBK) to beat earnings when it reports third-quarter 2014 results on Oct 22, before the market opens.
Why a Likely Positive Surprise?
Our proven model shows that Hudson City is likely to beat earnings because it has the right combination of two key components.
Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +16.67%. This is very meaningful and a leading indicator of a likely positive earnings surprise for the company.
Zacks Rank #3 (Hold): Note that stocks with Zacks Ranks #1 (Strong Buy), 2 (Buy) or 3 (Hold) have a significantly higher chance of beating earnings.
Moreover, Hudson City delivered positive earnings surprise in all the trailing four quarters, with an average beat of 23.81%.
Factors to Drive Q3 Results
The balance sheet restructuring program initiated by the bank has reduced the interest expenses in the first half of 2014. With the continuation of these restructuring activities, the company may report lower interest expense in third-quarter results.
In spite of the macro pressure, Hudson City’s credit parameters continue to show improvement over the past few quarters. Importantly, in the last few quarters, the company recorded no provision for credit losses. Moreover, it took measures to dispose non-performing loans during the quarter. This, we believe, will be reflected in the form of improved credit metrics in the results.
However, the persistent low interest rate environment is anticipated to put pressure on net interest margin which, in turn, is likely keep Hudson City’s top line under strain. Also, sluggish demand for loans will add to the woes.
Other Stocks to Consider
Hudson City is not the only firm looking up this earnings season. We also expect earnings beats from other companies in this space:
Arlington Asset Investment Corp. (AI) has an Earnings ESP of +7.34% and sports 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.
Ally Financial Inc. (ALLY) has an Earnings ESP of +2.44% and a Zacks Rank #3. It is slated to release results on Oct 29.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment