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Lower Rates, Fee Income to Mar Comerica's (CMA) Q2 Earnings

Comerica Incorporated CMA is scheduled to report second-quarter 2020 results before the opening bell on Jul 21. The bank’s revenues and earnings are likely to have witnessed a fall from the year-ago reported figures.

The company’s first-quarter 2020 results were impacted by lower net interest income and higher provisions. However, lower expenses and rise in loans were positive factors.

Notably, Comerica has a disappointing earnings surprise history. The company's results surpassed the consensus estimate in two of the trailing four quarters and missed in the other two, the average negative surprise being 38.96%.

Comerica Incorporated Price and EPS Surprise

 

Comerica Incorporated Price and EPS Surprise

Comerica Incorporated price-eps-surprise | Comerica Incorporated Quote

The Zacks Consensus Estimate for earnings for the first quarter is pegged at 21 cents, which suggests a decline of 89.2% from the year-ago reported number. Also, the consensus estimate for sales of $692 million indicates an 18.9% year-over-year fall.

Factors at Play

Muted Net Interest Income (NII): Per the Fed’s latest data, commercial and industrial, and commercial real estate loans portfolio improved year over year in the quarter, which is likely to have supported NII. However, as consumer sentiment dipped amid the coronavirus concerns, the demand for consumer loans was hit hard.

The Zacks Consensus Estimate for average earning assets of $72.6 billion for the quarter indicates 11.2% year-over-year growth. Lower deposit costs might have also offered some support.

However, a decline in interest rates in March to near-zero level as a move to protect the economy from the impacts of the coronavirus outbreak is likely to have hurt the company’s net interest margin, thereby, affecting NII.

The Zacks Consensus Estimate of $458 million for NII suggests a 24% year-over-year fall.

Lower Fee Income: Consumer spending remained unimpressive in the second quarter on account of the coronavirus outbreak-induced lockdowns, resulting in less usage of debit/credit cards and merchant payment processing services. Thus, card fees (a major contributor to fee income) might have declined in the to-be-reported quarter. The Zacks Consensus Estimate for card fees of $58 million implies a fall of 10.8% from the prior quarter’s reported figure.

Further, the consensus estimate for fiduciary income of $46.3 million indicates an 11% decline from the previous quarter’s reported number.

However, Comerica’s fee income might have witnessed support from higher service charges on deposit accounts on rise in deposits during the quarter.

The consensus estimate of $234 million for fee income suggests a 6.4% year-over-year fall.

Controlled Expenses: Its GEAR Up initiatives target to keep expenses under control. However, some impacts of technological investment and restructuring charges are likely to have persisted.

Now, let’s have a look at what our quantitative model predicts:

The chances of Comerica beating the Zacks Consensus Estimate in the second quarter are less. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Comerica is 0.00%.

Zacks Rank: Comerica currently has a Zacks Rank #3.

Stocks to Consider

Here are some finance stocks that you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model.

The Earnings ESP for CullenFrost Bankers, Inc. CFR is +6.27% and the stock carries a Zacks Rank of 3 at present. The company is slated to report second-quarter numbers on Jul 30. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Huntington Bancshares Incorporated HBAN is set to release earnings figures on Jul 23. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +11.6%.

T. Rowe Price Group, Inc. TROW is scheduled to release quarterly results on Jul 29. The company has an Earnings ESP of +3.91% and it currently sports a Zacks Rank of 1.

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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.

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