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Is a Beat in Store for PNC Financial (PNC) in Q2 Earnings?

Zacks Equity Research

The PNC Financial Services Group PNC is scheduled to report second-quarter 2019 results on Jul 17, before the opening bell. Its revenues and earnings are projected to grow year over year.

In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate. Rise in revenues, driven by easing margin pressure and escalating fee income, aided the results. However, higher costs and provisions were headwinds.

Notably, PNC Financial’s earnings surprise history is impressive. It surpassed the consensus estimate in three of the trailing four quarters, the average beat being 2.2%.

The PNC Financial Services Group, Inc Price and EPS Surprise

The PNC Financial Services Group, Inc Price and EPS Surprise

The PNC Financial Services Group, Inc price-eps-surprise | The PNC Financial Services Group, Inc Quote

Why a Likely Positive Surprise?

Our proven model shows that PNC Financial has the right combination of the two key ingredients — positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for PNC Financial is +0.88%.

Zacks Rank: The company currently carries a Zacks Rank of 3.

Also, activities of the company in the to-be-reported quarter were adequate to win analysts’ confidence. As a result, its Zacks Consensus Estimate for earnings of $2.83 has been revised upward over the past 30 days. Also, it reflects growth of 4% from the year-ago reported figure.

Now let’s discuss the factors that are likely to impact the company’s second-quarter results:

Soft Net Interest Income (NII) Growth: The lending scenario during the second quarter, particularly in Commercial and Industrial, and Real Estate front was disappointing. Hence, NII is expected to remain muted.

Also, the central bank’s accommodative policy stance, flattening of the yield curve and steadily rising deposit betas might hurt margin. However, the Zacks Consensus Estimate for average interest earning assets of $341 billion for the quarter indicates improvement of 3.9% year over year.

The Zacks Consensus Estimate of $2.51 billion for NII suggests 4% year-over-year rise.

Non-Interest Income Might Remain Muted: Pickup in refinancing activities on the back of lower mortgage rates during the quarter is likely to support PNC Financial’s fee income. Thus, the consensus estimate of $87 million for residential mortgage revenues projects a rise of 3.6%.

Given decent demand for credit and debit cards, PNC Financial’s consumer services revenues are likely to improve. The Zacks Consensus Estimate for consumer services revenues of $395 million indicates growth of 3.7% from the year-ago reported number. Also, service charges on deposits are projected to jump 3.6% to $175 million due to an increase in consumer spending.

However, decline in global M&A deals due to concerns of economic slowdown and uncertainty related to Brexit and U.S.-China trade war is likely to hurt the company’s corporate services fees.

The consensus estimate for non-interest income is $1.9 billion, indicating slight fall.

Moderate Rise in Expenses: The company’s continued efforts toward its cost savings might be partially offset by its digital expansion efforts. Notably, management expects non-interest expenses to increase in low-single digits on a sequential basis.

Other Stocks to Consider

Here are some other stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around.

Comerica Incorporated CMA is scheduled to release results on Jul 17. It has an Earnings ESP of +0.52% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

M&T Bank Corporation MTB is scheduled to release results on Jul 18. The company, which carries a Zacks Rank of 3, has an Earnings ESP of +0.20%.

The Earnings ESP for Wells Fargo & Company WFC is +0.11% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Jul 16.

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