Will Regions (RF) Miss on Q3 Earnings This Season?
Regions Financial Corporation (RF) is scheduled to report its third-quarter 2014 results before the opening bell on Tuesday, Oct 21.
In the last quarter, this banking giant delivered a 16.7% year-over-year increase in earnings, driven by prudent expense management. However, results were in line with the Zacks Consensus Estimate.
Will Regions be able to beat earnings 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 Drive Q3 Results
The unfavorable macro issues may weigh on Regions’ top line and balance sheet in the quarter. Among others, a dismal mortgage market, weak loan growth and stringent regulatory norms in a persistently low interest rate environment are the primary dampeners. Moreover, litigation costs related to recent settlements might drive down profitability.
However, Regions has some encouraging traits that may support its results. The company’s favorable funding mix, improved core business performance, its expansion mode and strategies are impressive. It also aims to control costs and improve long-term profitability.
What Management Expects?
Though management expects net interest margin to decline by 5–7 basis points going forward, loan growth might aid net interest income (NII.TO) growth.
Further, the company anticipates adjusted expenses in 2014 to decline from the 2013 level and efficiency ratio in the low 60s range.
Activities of Regions during the third quarter of the year 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 7 days.
Earnings Whispers
Our proven model does not conclusively show that Regions is likely to beat the Zacks Consensus Estimate in the third 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 Regions is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 21 cents.
Zacks Rank: Regions’ Zacks Rank #4 (Sell) further lowers the predictive power of ESP.
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:
Hudson City Bancorp, Inc. (HCBK) has an earnings ESP of +16.67% and carries a Zacks Rank #3. It is expected to report its third-quarter results on Oct 22.
Texas Capital BancShares Inc. (TCBI) has an earnings ESP of +1.33% and a Zacks Rank #2. It is slated to report results on Oct 22.
CIT Group Inc. (CIT) has an earnings ESP of +11.36% and a Zacks Rank #3. It is slated to report results on Oct 28.
Read the Full Research Report on RF
Read the Full Research Report on HCBK
Read the Full Research Report on CIT
Read the Full Research Report on TCBI
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