Citizens Financial (CFG) Q2 Earnings: What to Expect? - Analyst Blog

Citizens Financial Group, Inc. CFG is scheduled to report its second-quarter 2015 earnings on Tuesday, Jul 21, before market opens.

In first-quarter 2015, Citizens Financial’s adjusted earnings per share of 39 cents beat the Zacks Consensus Estimate of 35 cents. Results were aided by higher revenues and stable expense level.

Will Citizens Financial miss on earnings this quarter? Let’s see how things have shaped up.

What to Expect in Q2?

Citizens Financial initiated the implementation of a restructuring initiative last year. The effort is aimed at achieving operating efficiencies and containing costs. Owing to this, the company is incurring restructuring costs, which primarily include costs related to employee compensation, facilities and technology services. The company is also progressing with its strategic and regulatory initiatives.

Notably, Citizens Financial expects restructuring costs of $35–$40 million in the second quarter of 2015. As the company remains focused on expense management, the quarter is likely to exhibit improved efficiency ratio and deliver positive operating leverage.

Average loan growth is expected in the range of 1.5%–2% compared to the prior quarter. Loan to deposit ratio at the end of the quarter is estimated to be 98%–99%.

Loan growth is likely to support net interest income. However, net interest margin is expected to remain stable or trend downward, given the current low interest rate environment. The quarter is expected to include positive day count benefit of $6 million.

We believe that fee income will likely get a boost owing to the new checking product. Also, the company’s efforts to grow license bankers and add wealth advisors should improve trust and investment services fees. Overall, we expect stable to modest growth in the top line.

Though the quarter may witness reduced commercial recoveries, overall credit metrics are expected to remain stable. Provisions may exhibit slight increase on a sequential basis, with around 25% of the lower end of full-year guidance range of $350–$400million.

Activities of Citizens Financial during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter declined 2.6% to 37 cents per share over the last 7 days.

Earnings Whispers

Our proven model does not conclusively show that Citizens Financial is likely to beat the Zacks Consensus Estimate in the second 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 Citizens Financial is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 37 cents.

Zacks Rank: Citizens Financial carries a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.

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 Cullen/Frost Bankers, Inc. CFR is +3.57% and it carries a Zacks Rank #2. The company is expected to release its second-quarter results on Jul 29.

Huntington Bancshares Incorporated HBAN has an Earnings ESP of +5.00% and a Zacks Rank #2. It is scheduled to report results on Jul 23.

The Earnings ESP for American Capital, Ltd. ACAS is +26.09% and it sports a Zacks Rank #1. The company is scheduled to release results on Aug 5.

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