Will PNC Financial (PNC) Deliver Earnings Beat Again? - Analyst Blog

By Mark Vickery,

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The PNC Financial Services Group, Inc. ( PNC ) is scheduled to report its second-quarter 2014 results on Jul 16.

The company delivered positive earnings surprises in the trailing 4 quarters. Lower provision and prudent expense management drove earnings per share of $1.82 in first-quarter 2014, outpacing the Zacks Consensus Estimate by 16 cents.

Will PNC Financial be able to keep the earnings streak alive in this quarter as well? Let's see how things have shaped up for this announcement.

Factors to Influence Q2 Results

The overall banking sector did not witness any significant change in the second quarter from the first. While soft trading volumes, high legal costs, lower fixed income were on the downside, the quarter was characterized by increased mergers and acquisitions (M&A) and IPOs, aggressive cost control measures, and a favorable equity and asset market backdrop.

What Management Expects?

Fee income is expected to increase in the low single-digits. This may act as a catalyst to boost non-interest income, offsetting the downward trend in net interest income (NII) to some extent.

Further, management anticipates provision for credit losses to be in the range of $100.0-$150.0 million in the quarter. This expectation could be based on the gradual economic recovery that led to a decline in credit losses in the last few quarters.

Among others factors, modest loan growth could act as a positive. Notably, both loan and deposit balances exhibited growth in the last few quarters.

On the other hand, higher expenses and a lower NIM are expected to mar results this time.

Management anticipates expenses to be up by the low single-digits, owing to seasonality in the quarter. However, it should be noted that the company is focused on expense management initiatives.

Management projects NII to fall moderately due to continued decline in purchase accounting accretion and spread compression. We observed that the company has experienced a volatile trend in NII and net interest margin (NIM) growth since 2009 and has not been able to reverse the trend in the recent quarters.

Activities of PNC Financial during the quarter were inadequate to win analysts' confidence. As a result, the Zacks Consensus Estimate for the quarter declined 0.6% to $1.77 per share over the last 7 days.

Earnings Whispers

Our proven model shows that PNC Financial is likely to beat the Zacks Consensus Estimate in the second quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least #2 (Buy) or #3 (Hold) for this to happen. The favorable position of PNC Financial is elaborated below.

Earnings ESP : The Earnings ESP for PNC Financial is +0.57%. This is because the Most Accurate estimate of $1.78 is above the Zacks Consensus Estimate of $1.77 per share.

Zacks Rank : PNC Financial's Zacks Rank #3 further increases the predictive power of ESP.

Stocks That Warrant a Look

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 quarter:

Fifth Third Bancorp ( FITB ) has an earnings ESP of +4.44% and carries a Zacks Rank #3. It is scheduled to report its second-quarter results on Jul 17.

Capital One Financial Corp. ( COF ) has an earnings ESP of +1.12% and carries a Zacks Rank #2. It is expected to report its second-quarter results on Jul 17.

Regions Financial Corp. ( RF ) has an earnings ESP of +4.76% and carries a Zacks Rank #3. It is scheduled to report its second-quarter results on Jul 22.

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REGIONS FINL CP (RF): Free Stock Analysis Report

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FIFTH THIRD BK (FITB): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Stocks: NIM , PNC , RF , COF , FITB

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