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Is PNC Financial (PNC) Poised to Beat Q3 Earnings?

We expect The PNC Financial Services Group, Inc.PNC to beat earnings expectations when it reports its third-quarter 2015 results on Wednesday, Oct 14, 2015.

Why a Likely Positive Surprise?

Our proven model shows that PNC Financial has the right combination of two key ingredients to beat earnings.

Positive Zacks ESP : The Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.12%. This is a very meaningful and leading indicator of a likely positive earnings surprise for the company.

Zacks Rank #3 (Hold) : PNC Financial carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement.

The combination of PNC Financial's Zacks Rank #3 and ESP of +1.12% makes us confident of an earnings beat on Oct 14.

What to Expect?

We believe PNC Financial's results are likely to get support from its diverse fee income base and several of its expense management initiatives.

Management noted in its second-quarter conference call that net interest income in the third quarter is expected to remain stable compared to the second quarter. Also, the fee categories of noninterest income (asset management, consumer services, corporate services, residential mortgage and service charges on deposits) are expected to remain stable sequentially.

As the company remains focused on driving operational efficiency through its cost-containment efforts, management increased its full-year continuous improvement savings program ("CIP") goal by $100 million to $500 million in July 2015. Notably, as a result of this increase in CIP goal, expenses are likely to remain stable sequentially in the third quarter.

Management anticipates a modest rise in overall loans. However, it expressed concern with the company's exposure in the oil and gas sector. Currently, the company's total outstanding loans in this space are $2.6 billion, representing around 2% of the total commercial lending portfolio. Of these, $300 million are expected to be impacted by the fall in oil prices .

However, considering the broader lending picture, the company's exposure is rather minimal. Additionally, management expects commercial and industrial loans to rise at a modest pace, while retail and education loan portfolios are likely to see increased run-offs.

Activities of PNC Financial during the quarter were adequate to win analysts' confidence. The Zacks Consensus Estimate remained stable at $1.78 per share over the last seven days.

Stocks That Warrant a Look

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 quarter:

The M&T Bank Corporation MTB has an earnings ESP of +2.02% and carries a Zacks Rank #3. It is expected to report its third-quarter results on Oct 16.

The earnings ESP for The Bank of New York Mellon Corporation BK is +1.39% and it carries a Zacks Rank #3. The company is scheduled to release its third-quarter results on Oct 20.

Capital One Financial Corporation COF has an earnings ESP of +0.52% and carries a Zacks Rank #3. The company is expected to report its third-quarter results on Oct 22.

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PNC FINL SVC CP (PNC): Free Stock Analysis Report

CAPITAL ONE FIN (COF): Free Stock Analysis Report

M&T BANK CORP (MTB): Free Stock Analysis Report

BANK OF NY MELL (BK): 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.


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

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