U.S. Markets open in 3 hrs 8 mins

Muted Lending, Low Rates to Hurt Comerica (CMA) Q4 Earnings

Zacks Equity Research

Comerica Incorporated CMA is scheduled to report fourth quarter and 2019 results before the opening bell on Jan 21. The bank’s revenues and earnings are likely to have witnessed year-over-year fall.

The company’s third-quarter results were supported by non-interest income growth, higher deposits and lower expenses.  However, lower loans and rise in provisions were the undermining factors.

Notably, the company boasts an impressive earnings surprise history. It surpassed estimates in three of the trailing four quarters, the positive earnings surprise being 1.5%, on average.

Comerica Incorporated Price and EPS Surprise

Comerica Incorporated Price and EPS Surprise

Comerica Incorporated price-eps-surprise | Comerica Incorporated Quote

The Zacks Consensus Estimate for earnings for the fourth quarter is $1.74, which suggests decline of 7.5% from the year-ago reported number. Also, the consensus estimate for sales of $801.7 million indicates 7.2% fall.

Factors at Play

Muted Net Interest Income (NII): Per the Fed’s latest data, commercial and industrial, and revolving home equity loans slowed down in the quarter, which is likely to have affected NII. Also, the Fed’s interest rate cuts might have hurt Comerica’s net interest margin.

However, the Zacks Consensus Estimate for average earning assets of $66.4 billion for the quarter indicates 1.1% year-over-year growth.

Management expects a decline in NII due to lower interest rates as well as lower interest recoveries and loan fees from elevated third-quarter levels.

Higher Fee Income: Comerica’s fee income might have witnessed support from higher service charge on deposit accounts on account rise in deposits during the quarter.

Also, consumer spending remained decent in the fourth quarter, resulting in usage of debit/credit cards and merchant payment processing services. Thus, card fees (a major contributor to fee income in 2018) might have lent support to its top line in the to-be-reported quarter.

The company expects non-interest income to remain relatively stable, excluding the impact of deferred compensation asset returns. Modest growth in a number of customer-driven categories is likely to have been more than offset by reduction in syndication fees and fiduciary income from elevated third-quarter levels.

Controlled Expenses: The company’s GEAR Up initiatives target to keep expenses under control. However, some impact of technological investment and restructuring charges is likely to have persisted.

Now, let’s have a look at what our quantitative model predicts:

The chances of Comerica beating the Zacks Consensus Estimate in the fourth quarter are less. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing 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 Comerica is -2.01%.

Zacks Rank: Comerica currently has a Zacks Rank #3.

Stocks to Consider

Here are some finance stocks that you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model.

TD Ameritrade Holding Corporation AMTD has an Earnings ESP of +0.39% and a Zacks Rank #3 at present. The company is slated to release results on Jan 21.

Associated Banc-Corp ASB is slated to release results on Jan 23. It presently has an Earnings ESP of +1.10% and a Zacks Rank #3.

Bank of Hawaii Corporation BOH is slated to release results on Jan 27. It currently has an Earnings ESP of +0.37% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Free: Zacks’ Single Best Stock Set to Double

Today you are invited to download our latest Special Report that reveals 5 stocks with the most potential to gain +100% or more in 2020. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.

This pioneering tech ticker had soared to all-time highs and then subsided to a price that is irresistible. Now a pending acquisition could super-charge the company’s drive past competitors in the development of true Artificial Intelligence. The earlier you get in to this stock, the greater your potential gain.

See 5 Stocks Set to Double>>