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Fee Income, Loan Growth to Aid Popular's (BPOP) Q1 Earnings

Zacks Equity Research

Popular BPOP is scheduled to report first-quarter 2019 results on Apr 18, before the opening bell. Its revenues and earnings are projected to grow year over year.

In the last reported quarter, the company’s earnings lagged the Zacks Consensus Estimate. Results reflected higher expenses, partially offset by improvement in net interest income and lower provisions.

Notably, Popular surpassed the consensus estimate in three of the trailing four quarters, the average beat being 9.5%.

Popular, Inc. Price and EPS Surprise

Popular, Inc. Price and EPS Surprise | Popular, Inc. Quote

However, its activities in the first quarter were inadequate to encourage analysts. As a result, the Zacks Consensus Estimate for earnings of $1.45 remained unchanged over the past 30 days. Nevertheless, it reflects a year-over-year improvement of 62.9%. Also, the consensus estimate for sales of $603.7 million indicates an increase of 19.2%.

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Now, before we take a look at what our quantitative model predicts, let’s discuss the factors that are likely to impact the company’s first-quarter results.

Factors at Play

Net Interest Income (NII) to Improve: Improvement in commercial and consumer loans scenario, and benefits from December 2018 interest rate hike, are likely to boost NII.

The Zacks Consensus Estimate of $465 million for NII projects 18.3% year-over-year rise.

Fee Income Likely to Increase: Consumer spending remained decent during the quarter, which is likely to result in higher debit/credit transactions. Thus, Popular is expected to report higher related fees. Also, service charges on deposits are expected to increase, given the continued momentum in customer activity. Furthermore, with strong equity markets, trust fees might improve.

However, mortgage banking revenues are likely to be weak as mortgage refinancing activities and fresh originations might have remained muted in the first quarter due to higher interest rates.

Given the expectations of rise in most components, the consensus estimate for non-interest income is $139 million, indicating 21.9% growth on a year-over-year basis.

Expenses to Trend Higher: Popular’s cost base is expected to remain elevated on account of investments in technology along with higher regulatory and personnel costs. Also, the acquisition of Reliable is likely to add to the expense base.

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

According to our quantitative model, we cannot conclusively predict whether Popular will beat the Zacks Consensus Estimate in the first quarter. This is because it does not have the right combination of the two key ingredients — a 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 Popular is 0.00%.

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

Stocks to Consider

Here are some 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.

Bank OZK OZK is scheduled to release results on Apr 17. It has an Earnings ESP of +1.78% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Synovus Financial Corp. SNV is scheduled to release results on Apr 23. The company, which carries a Zacks Rank of 3, has an Earnings ESP of +0.78%.

The Earnings ESP for East West Bancorp, Inc. EWBC is +0.25% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Apr 18.

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Synovus Financial Corp. (SNV) : Free Stock Analysis Report
 
Popular, Inc. (BPOP) : Free Stock Analysis Report
 
East West Bancorp, Inc. (EWBC) : Free Stock Analysis Report
 
Bank OZK (OZK) : Free Stock Analysis Report
 
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Zacks Investment Research