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Is an Earnings Beat in Store for SVB Financial (SIVB) in Q3?

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SVB Financial Group SIVB is scheduled to announce third-quarter 2018 results on Oct 25, after the market closes. 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. Higher revenues and loan growth aided results. However, higher non-interest expenses and a surge in provision for credit losses acted as headwinds.

Moreover, the company boasts an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 15.9%.

SVB Financial Group Price and EPS Surprise

SVB Financial Group Price and EPS Surprise | SVB Financial Group Quote

However, activities of the company during the third quarter failed to encourage analysts to revise earnings estimates upward. Thus, the Zacks Consensus Estimate for earnings for the to-be-reported quarter has remained stable at $4.44 over the past 30 days. Nonetheless, the figure represents year-over-year surge of 59.1%.

The Zacks Consensus Estimate for sales for the third quarter is $664.5 million, reflecting year-over-year growth of 24.7%.

Factors to Influence Q3 Results

Increase in Net Interest Income: Per the Fed’s latest data, commercial loans (constituting a major part of SVB Financial’s loan portfolio), as well as real estate loans, recorded improvement during the third quarter.

The Zacks Consensus Estimate for average interest earning assets of $54.1 billion for the third quarter represents rise of 12.7% year over year. This, along with modest loan growth and higher interest rates, will likely support the bank’s net interest income in the to-be-reported quarter.

Fee Income to Modestly Rise: Given the expectation of an increase in deposit balances in the third quarter, SVB Financial’s service charge on deposits is likely to improve. Moreover, supported by increase in credit card related consumer loans during the to-be-reported quarter, the company’s credit card fees are expected to rise.

Thus, SVB Financial’s non-interest income is expected to witness a slight increase in the third quarter.

Likely Rise in Expenses: SVB Financial’s adjusted non-interest expenses are expected to increase due to its continued spending on technology systems overhaul and investment in franchise.

Asset Quality not Likely to Lend Much Support: The Zacks Consensus Estimate for allowance for loan losses of $302 million reflects an increase of 21.3% from the year-ago quarter. Further, the consensus estimate for non-performing assets of $131 million indicates rise of 4.8%.

Here is what our quantitative model predicts:

According to our quantitative model, chances of SVB Financial beating the Zacks Consensus Estimate in the third quarter are high. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to be confident of an earnings surprise call.

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 SVB Financial is +1.22%.

Zacks Rank: SVB Financial has a Zacks Rank #1 (Strong Buy), which further increases the predictive power of ESP.

Other Stocks That Warrant a Look

Here are a few other stocks that you may want to consider, as according to our model, these too have the right combination of elements to come up with an earnings beat this quarter.

Franklin Resources, Inc. BEN has an Earnings ESP of +0.68% and a Zacks Rank of 3. The company is slated to release results on Oct 25.

T. Rowe Price Group, Inc. TROW is also scheduled to release results on Oct 25. It has an Earnings ESP of +0.78% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Apollo Global Management, LLC APO is slated to release results on Oct 31. It has an Earnings ESP of +17.30% and a Zacks Rank #3.

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SVB Financial Group (SIVB) : Free Stock Analysis Report
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