Zions Bancorporation ZION is scheduled to report its first quarter 2015 results on Apr 20, after the market closes.
Last quarter, earnings per share missed the Zacks Consensus Estimate. Results suffered owing to a decline in net interest income and elevated provisions. However, growth in loans and deposits along with lower expenses slightly salvaged the results.
Zions’ earnings missed the Zacks Consensus Estimate in three of the trailing last four quarters. The average negative surprise was 3.12%.
Is Zions likely to miss on earnings this quarter as well? Let’s see how things have shaped up for this announcement.
Factors Influencing Q1 Results
Zions’ net interest income (NII) and net interest margin (NIM) has been under considerable strain due to the persistent low interest rate environment, FDIC supported loan and low yield loans. We expect the pressure on NII and NIM to continue in the upcoming release with debt reductions easing off the steam to some extent later this year. Also, fewer days in this quarter compared to the previous quarter will increase the pressure on NII.
However, management foresees a modest upward trend in the core components of non-interest income such as service fees, given the company’s enhanced efforts to drive organic growth and fee income going forward. This will help support top-line growth in the upcoming release along with expected improvement in loans and deposits.
The company remains focused on cost control and continues to reduce certain labor intensive expenses with the help of technological advancement. However, with management anticipating non-interest expenses to remain stable during the year, we expect muted progress on the expense front this quarter.
In addition, the company’s improving credit quality will work in its favor. Though provisions are projected to remain positive based on net charge-offs, loan growth and anticipated downgrade of energy-related loan portfolios in the upcoming release, management expects enhanced credit quality, given the improved loan portfolio and overall expected economic recovery. Also, the upgrade of the company’s risk management is expected to result in very low net charge-off ratio relative to the industry and a low non-performing loans ratio.
Zions’ activities during the quarter were not adequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate declined by a penny to 36 cents per share over the last 7 days.
Earnings Whispers
Our proven model does not conclusively show that Zions 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 Zions is -2.78%. This is because the Most Accurate estimate of 35 cents per share is below the Zacks Consensus Estimate of 36 cents per share.
Zacks Rank: Zions’ 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 That Warrant a Look
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:
Popular, Inc. BPOP has an Earnings ESP of +9.86% and carries a Zacks Rank #1. It is scheduled to report results on Apr 27.
SVB Financial Group SIVB has an Earnings ESP of +2.24% and a Zacks Rank #1. The company will report results on Apr 23.
Primerica, Inc. PRI has an Earnings ESP of +8.54% and a Zacks Rank #2. It is scheduled to report on May 6.
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