U.S. Bancorp (USB) to Report Q2 Earnings: What's in Store?

U.S. Bancorp USB is scheduled to report second-quarter 2018 results on Jul 18, before the opening bell. The bank’s revenues and earnings are anticipated to reflect year-over-year growth.

Benefits of higher rates and improved lending scenario are anticipated to have offset the muted trading performance. The Zacks Consensus Estimate for sales of $5.6 billion reflects a rise of 3.7% from the year-ago quarter.

Further, in this era of digitization, card operations are expected to have witnessed a rise. Thereby, the to-be-reported quarter will likely reflect growth in credit and debit card revenues (account for around 13% of total fee income). The Zacks Consensus Estimate of $346 million indicates a rise of 8.5% from the year-earlier quarter.
 

U.S. Bancorp Price and EPS Surprise

U.S. Bancorp Price and EPS Surprise | U.S. Bancorp Quote

Other Factors to Influence Q2 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 will provide some support despite flattening of the yield curve in the second quarter.

Management expects net interest income to reflect increase in mid-single digits, on a year-over-year basis, in the quarter.

Moreover, the Zacks Consensus Estimate for average interest earning assets of $415.1 million for the April-June quarter indicates 2.8% year-over-year improvement. Further, the Zacks Consensus Estimate for net interest income is $3.2 billion, up 3.2% year over year.

Consumer Revenue Growth: An improving economy is anticipated to have spurred consumer activity in second-quarter 2018, helping the payments, as well as consumer lending businesses. An improved economic backdrop will also have led to rise in business spending on development and capital investments.

Mortgage Banking Likely to be Lackluster: The mortgage business of U.S. Bancorp is expected to have witnessed a slowdown in the second quarter. With the interest rates moving higher, refinancing activities and fresh originations have been slowing down. Therefore, no major help is expected from this segment. Thus, growth in U.S. Bancorp’s mortgage banking revenues will likely have remained low. The Zacks Consensus Estimate for mortgage banking revenues is $196 billion, down 7.5% year over year.

Overall Non-Interest Revenues to Disappoint: Outflows from the investment management business will likely have been recorded on market declines. Growth in trading revenues is predicted to have been muted as uncertainties, mainly related to the U.S.-China trade war and some other geo-political tensions were not enough to induce volatility. In addition, trust income is likely to disappoint on lower equity markets.

The Zacks Consensus Estimate for non-interest revenues is $2.4 billion, moderately down year over year.

However, management expects fee income to reflect increase in low-single digits, on a year-over-year basis. Notably, fees are seasonally higher in the second quarter.

Expenses Might Trend Higher: While the absence of considerable legal expenses is a positive, increased investments in technology to improve digital offerings might have escalated costs moderately.

Why a Likely Positive Surprise?

Our proven model shows that U.S. Bancorp is likely to beat on earnings in the second quarter. This is because the company has 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.

Zacks ESP: The Earnings ESP for the stock is currently pegged at +0.23%. This is a very significant and leading indicator of a likely positive earnings surprise for the company.

Zacks Rank: The combination of U.S. Bancorp’s Zacks Rank #3 and a positive ESP makes us confident of an earnings beat.  

Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into an earnings announcement.

Stocks That Warrant a Look

Here are some other 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.

State Street Corporation STT is slated to release results on Jul 20. The company has an Earnings ESP of +0.28% 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 Cullen/Frost Bankers, Inc. CFR is +0.56% and it also carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Jul 26.

SunTrust Banks, Inc. STI has an Earnings ESP of +0.21% and holds a Zacks Rank of 2. It is scheduled to report results on Jul 20.

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U.S. Bancorp (USB) : Free Stock Analysis Report
 
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