People's United Financial Inc. (PBCT) is set to report fourth-quarter and full year 2014 results on Thursday, Jan 15.
Last quarter, this financial savings and loan institution delivered in-line earnings. While higher revenues, lower expenses and rise in loans and deposits acted as positives, decreased non interest income and higher provisions for loan losses posed concerns.
Will People's United impress in the upcoming release after combating the challenges that the industry witnessed during the quarter? Let's see what factors might have influenced the earnings report this time around.
Factors to Influence Fourth-Quarter Results
We remain optimistic about net interest income growth. People’s United stated in its third-quarter earnings call conference that growth in net interest income from its originated portfolio exceeding lost accretion on the acquired portfolio remains a driving factor for the quarters following the third quarter.
Further, overall loan growth should aid in improved net interest income. Also, fee income growth should boost revenues.
We believe People’s United’s expense-savings initiatives should support bottom line. Management anticipates expenses to trend in the current range of $205–$207 million for the fourth quarter. Further, strengthening the balance sheet through expense management initiatives is likely to improve efficiency of the company. Management targeted bringing efficiency ratio in the low 60s for 2014.
Low levels of runoff across all loan portfolios of the company including acquired loan portfolio are expected. A tepid runoff is expected to drive loan growth. As the company remains focused on deposit gathering, the quarter may also experience increased deposit balance.
However, increased regulations and rising compliance costs might act as dampeners. Also, a persistent low-rate environment could put pressure on the net interest margin (NIM). Management anticipated NIM to be in the lower end of the range of 3.10% to 3.20% in 2014.
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 21 cents per share over the last seven days.
Earnings Whispers
Our proven model does not conclusively show that People's United 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 People's United is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 21 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 PNC Financial Services Group, Inc. (PNC) has an earnings ESP of +1.15% and carries a Zacks Rank #3. It is scheduled to report results on Jan 16.
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.
BOK Financial Corp. (BOKF) has an earnings ESP of +0.94% and a Zacks Rank #3. It is slated to report results on Jan 28.
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