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Why an Earnings Beat is Likely for Comerica (CMA) in Q1

Zacks Equity Research
Updated

Comerica Incorporated CMA is scheduled to report first-quarter 2018 results before the opening bell on Apr 17. Its revenues and earnings are expected to grow year over year.

The improving economic backdrop — reflecting lower commercial tax, rise in consumer spending and decent lending scenario — is likely to support Comerica’s results. The Zacks Consensus Estimate for revenues of $811.6 million for the first quarter reflects year-over-year growth of 9.5%.

Before we discuss why an earnings beat might also be in store, let’s take a look at how the company performed in the prior quarter.

Comerica’s fourth-quarter 2017 results reflected an increase in revenues supported by easing margin pressure and higher fee income. Also, strong capital position and improving credit quality were the positives. However, higher expenses and a fall in loan balance were the key headwinds.

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Notably, the company boasts an impressive earnings surprise history. It surpassed earnings estimates in each of the trailing four quarters, with an average positive surprise of 8%.

The positive earnings surprises along with fundamental strength helped Comerica’s shares gain 45.6% over the past year, outperforming the industry’s 19.3% rally.

 

Comerica Incorporated Price and EPS Surprise

Comerica Incorporated Price and EPS Surprise | Comerica Incorporated Quote

A Surprise in Store?

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 in the first quarter.

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 Comerica is +0.95%.

Zacks Rank: Comerica carries a Zacks Rank of 3.

Though estimates for the to-be-reported quarter have remained stable over the last seven days, the Zacks Consensus Estimate for earnings of $1.49 reflects growth of 34.2% year over year.

Factors to Drive the Results

Net Interest Income to Rise: Comerica’s net interest income is likely to improve in the to-be-reported quarter supported by expanding net interest margin and decent loan growth.

Higher Fee Income: Trend of consumer spending was strong during the first quarter, which is likely to boost Comerica’s non-interest income. Also, investment banking and equity markets were decent due to higher volumes of M&As. Thus, the related fees are expected to increase marginally.

Lower Mortgage Banking Revenues: The company is likely to continue witnessing lower revenues from this division owing to slowdown in refinancing activities caused by rising interest rates.

Credit Quality Might Improve: The quarter continued to witness benign credit quality trends. Also, Moody’s Investors Service has projected a favorable credit environment for the banks in 2018. The consensus estimate shows 21.3% and 19.8% decline in non-performing assets and non-performing loans, respectively, on a year-over-year basis.

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.

U.S. Bancorp USB is slated to release results on Apr 18. The company has an Earnings ESP of +0.96% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BB&T Corporation BBT is slated to release results on Apr 19. It has an Earnings ESP of +1.63% and carries a Zacks Rank #3.

The Bank of New York Mellon Corporation BK has an Earnings ESP of +0.21% and carries a Zacks Rank of 3. The company is also slated to release results on Apr 19.

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BB&T Corporation (BBT) : Free Stock Analysis Report
 
Comerica Incorporated (CMA) : Free Stock Analysis Report
 
U.S. Bancorp (USB) : Free Stock Analysis Report
 
The Bank of New York Mellon Corporation (BK) : Free Stock Analysis Report
 
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Zacks Investment Research