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What to Expect From Fifth Third (FITB) This Earnings Season?

Zacks Equity Research

Fifth Third Bancorp FITB is scheduled to report fourth-quarter 2018 results on Jan 22, before the opening bell. The bank’s results are anticipated to reflect year-over-year growth in revenues and earnings.

Also, the company has an impressive earnings surprise history. It topped earnings in each of the trailing four quarters, the average positive earnings surprise being 10.38%.

In the last reported quarter, the bank’s earnings surpassed the Zacks Consensus Estimate. Results were supported by increase in net interest income, along with significant decline in provisions and a strong capital position. Expanding net interest margin and rising loans balance remained key positives. However, rise in expenses was an undermining factor.

Fifth Third’s shares have gained 6.4% in the past three months compared with the industry’s slight growth.

Will the upcoming earnings release give a further boost to Fifth Third’s stock? That depends largely on whether or not the firm is able to impress the market with its fourth-quarter results.

Fifth Third Bancorp Price and EPS Surprise

Fifth Third Bancorp Price and EPS Surprise | Fifth Third Bancorp Quote

Factors to Influence Q4 Results

Steady Net Interest Income Growth: A modest increase in lending — mainly in the areas of commercial and industrial, and consumer — is expected to have led to improvement in net interest income (NII). A rise in interest rates should provide some support as well, partially offset by flattening of the yield curve in the to-be-reported quarter.

Management expects NII to be up 2% in the quarter. NIM is projected to expand 2-3 basis points sequentially.

Fee Income Might Rise Slightly: Fifth Third’s focus on strengthening its fee income base through the North Star initiatives is likely to have lent support. Moreover, the trend of consumer spending was strong during the quarter under review, which might have boosted the bank’s credit and debit card revenues. However, poor mortgage banking revenues during the quarter are anticipated to have offset the positives to some extent.

For the fourth quarter, the company expects non-interest income to be up nearly 2% from the third quarter. Notably, corporate banking revenues are likely to increase considerably on a sequential basis as well.

Expenses Might Flare Up Slightly: Fifth Third’s ongoing strategic investments in several areas, such as technology, might escalate expenses. However, the company is expected to have been successful in offsetting this upsurge through its North Star initiatives to some extent.

For the fourth quarter, the company expects non-interest expenses to reflect rise of 1% sequentially.

Here is what our quantitative model predicts:

Our proven model shows that the company doesn’t have the combination of the two key ingredients for a possible earnings beat — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold).

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

Earnings ESP: Earnings ESP for Fifth Third is -0.59%.

Zacks Rank: The stock currently carries a Zacks Rank #3.  

Notably, the Zacks Consensus Estimate for earnings of 67 cents reflects a 28.9% jump on a year-over-year basis. Further, the consensus estimate for sales of $1.66 billion indicates 8.2% increase from the prior-year quarter.

Stocks That Warrant a Look

Here are some stocks you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.

Ares Capital Corporation ARCC is slated to release results on Feb 12. The company has an Earnings ESP of +1.10% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Huntington Bancshares Incorporated HBAN is +3.97% and it also carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Jan 24.

Prosperity Bancshares PB has an Earnings ESP of +1.11% and holds a Zacks Rank of 3. It is slated to report December quarter-end results on Jan 30.

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