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Rise in Card Fees to Support Comerica's (CMA) Q2 Earnings

Zacks Equity Research

Comerica Incorporated CMA is scheduled to report second-quarter 2019 results before the opening bell on Jul 17. Its revenues and earnings are expected to grow year over year.

Before we discuss whether Comerica will be able to keep its earnings beat streak alive in the to-be-reported quarter as well, let’s take a look at how the company performed in the last reported quarter.

The company’s first-quarter results reflected robust organic growth on rise in revenues, higher loans and improved credit metrics. A strong capital position was another positive. However, fall in deposits and higher expenses were key headwinds.

Notably, the company boasts an impressive earnings surprise history. It surpassed estimates in each of the trailing four quarters, the average positive surprise being 7.4%.

Comerica Incorporated Price and EPS Surprise

Comerica Incorporated Price and EPS Surprise

Comerica Incorporated price-eps-surprise | Comerica Incorporated Quote

Why a Likely Positive Surprise?

Our proven model shows that Comerica 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 Comerica is +0.52%.

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

Notably, the Zacks Consensus Estimate of $2.01 for the quarter’s earnings indicates growth of 7.5% from the year-ago reported number.

Factors to Drive Results

Net Interest Income (NII) to Disappoint: Per the Fed’s latest data, commercial and industrial, and real estate lending activities slowed down in the second quarter, thereby affecting NII. Also, the Fed’s accommodative policy stance along with flattening of the yield curve might hurt Comerica’s net interest margin.

Further, the Zacks Consensus Estimate for average earning assets of $65 billion for the quarter indicates slight year-over-year decline.

Slight Growth in Card Fees: Consumer spending likely picked pace in the second 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 lend support to its top line in to-be-reported quarter.

Controlled Expenses: The company’s GEAR Up initiatives are expected to keep expenses under control. However, some impact of technological investment, seasonal rise in compensation expenses and restructuring charges are likely to persist.

Credit Quality to Improve: Credit quality is likely to remain strong on the back of an improving economy. Also, the consensus estimate suggests nearly 25% decline in non-performing assets and loans from the year-ago reported figure.

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.

BB&T BBT is scheduled to release results on Jul 18. It has an Earnings ESP of +1.24% 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 PNC Financial PNC is +0.88% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Jul 17.

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Comerica Incorporated (CMA) : Free Stock Analysis Report
BB&T Corporation (BBT) : Free Stock Analysis Report
The PNC Financial Services Group, Inc (PNC) : Free Stock Analysis Report
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