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Higher Loans, Card Fees to Aid Cadence's (CADE) Q1 Earnings

Zacks Equity Research

Cadence CADE is scheduled to report first-quarter 2019 results before the opening bell on Apr 29. Its revenues and earnings are expected to grow year over year.

Before we take a look at what our quantitative model predicts, let’s check how the company performed in the past quarters.

Cadence has an impressive surprise history. It outpaced earnings estimates in three of the trailing four quarters, the average positive surprise being 5.7%.

In the last reported quarter, the bank’s earnings missed the Zacks Consensus Estimate. Results were impacted by decline in fee income along with rise in expenses and provisions. However, growth in loan and deposits lent some support.

Cadence Bancorp Price and EPS Surprise

Cadence Bancorp Price and EPS Surprise | Cadence Bancorp Quote

However, activities of the company during the first quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for earnings of 49 cents remained unchanged over the last seven days. Nevertheless, it indicates an improvement of 6.5% from the prior-year quarter’s reported figure.

Also, the consensus estimate for sales of $182.8 million implies 57.5% growth.

Here is what our quantitative model predicts:

Cadence doesn’t have 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 company has an Earnings ESP of -5.80%.

Zacks Rank: It carries a Zacks Rank #3, which increases the predictive power of ESP. But we need to have positive Earnings ESP to be sure of an earnings beat.

Factors to Influence Q1 Results

Steady Net Interest Income Growth: A modest increase in lending — mainly in the areas of commercial and consumer — is expected to have led to improvement in net interest income. Also, the Fed rate hike in December 2018 should provide some support, partially offset by flattening and sometimes inversion of the yield curve in the to-be-reported quarter.

Fee Income Might Rise: With the improving economy, deposits are likely to have increased, leading to higher revenues from service charge on deposits. Also, per the Fed’s data, demand for credit card loans likely picked pace in the last two months of the first quarter and might result in card-related fees. In addition, trust income is likely to reflect improvement on strong equity markets.

Expenses Might Trend Higher: Increased investments in technology to improve digital offerings and seasonal rise in employee compensation and benefits might have escalated costs moderately.

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.

Credit Acceptance Corporation CACC is slated to release results on Apr 29. The company has an Earnings ESP of +0.08% and carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The First of Long Island Corporation FLIC has an Earnings ESP of +2.33% and holds a Zacks Rank of 3, at present. It is slated to report results on Apr 29.

Affiliated Managers Group AMG has an Earnings ESP of +0.45% and carries a Zacks Rank #2. It is set to report quarterly numbers on Apr 29.

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