Hudson City Bancorp, Inc.
) is scheduled to report its first-quarter 2014 results on
Tuesday, Apr 29, before the opening bell.
The company closed 2013 on an optimistic note as it delivered a
positive earnings surprise of 28.6% in the final quarter. Results
were aided by higher non-interest income, no provision for loan
losses and lower expenses, partially offset by lower net interest
Will Hudson City succeed to surprise in the upcoming release as
well? Let's see how things have shaped up for this
Factors at Play
Major U.S. equity indexes witnessed an uptick during first
quarter, but the overall market remained volatile. The financial
institutions faced challenges with weak consumer and corporate
activities, lackluster mortgage banking activities and mounting
legal costs. Despite having decent fundamentals, Hudson City is
likely to see some impact of these negatives in its bottom-line
However, we expect its efforts to improve operating efficiency to
support its results to a great extent. As the company has been
struggling with its net interest income due to a low interest
rate environment, it is focusing more on non-interest revenue
sources. Non-interest income recorded a sequential rise in all
quarters of 2013. We expect results in the upcoming quarters to
show a similar trend.
Another positive worth mentioning is that the company has managed
to lower its interest expenses in the past couple of quarters
through restructuring initiatives. Provision for loan losses also
declined steadily since first-quarter 2013, which ended with no
provision in the final quarter. Though the company has not
indicated anything related to these during the quarter, we do not
expect this trend to reverse this time as well, given its
continued focus on restructuring.
On the other hand, Hudson City indicated in its 2013 annual
report that in the upcoming quarters it will continue to reduce
mortgage-related assets that comprised 89.8% of average
interest-earning assets in 2013. The move to reduce balance sheet
size is an effort to reduce interest rate risk on such
Though the initiative provides a shield to combat the current
dismal mortgage scenario, we believe such reduction will reflect
a further decline in its income on first mortgage loans and
mortgage-backed securities that has already recorded a
significant decrease in 2013.
Activities of Hudson City during the quarter were not enough to
encourage analysts' confidence. As a result, the Zacks Consensus
Estimate for the quarter remained stable at 8 cents per share
over the last 7 days.
Our proven model does not conclusively show that Hudson City is
likely to beat the Zacks Consensus Estimate in the upcoming
announcement. This is because a stock needs to have both a
and a Zacks Rank #3 (Hold) or better for this to happen.
Unfortunately, this is not the case here as elaborated below.
The Earnings ESP for Hudson City is 0.00%. This is because
both the Most Accurate estimate and the Zacks Consensus Estimate
stand at 8 cents.
Though Hudson City's Zacks Rank #3 (Hold) increases the
predictive power of ESP, we also need to have a positive ESP to
be confident about an earnings beat.
Other Finance Stocks
BANKUNITED INC (BKU): Free Stock Analysis
FIRST HRZN NATL (FHN): Free Stock Analysis
HUDSON CITY BCP (HCBK): Free Stock Analysis
LAZARD LTD (LAZ): Free Stock Analysis Report
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One may consider
) as it has an earnings ESP of +1.82% and carries a Zacks Rank #1
(Strong Buy). It is expected to deliver an earnings surprise when
it reports its first-quarter results on May 1.
Here are a couple of stocks from the finance sector that beat
estimates and our model rightly predicted their performance. Both
these stocks had the right combination of elements to post an
earnings beat this quarter.
) first-quarter 2014 earnings per share of 53 cents surpassed the
Zacks Consensus Estimate of 44 cents primarily on the back of
growth in non-interest income.
Driven by prudent expense management,
First Horizon National Corp.
) reported first-quarter 2014 earnings per share of 19 cents,
outpacing the Zacks Consensus Estimate by 4 cents.