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Will High Costs Hurt Huntington (HBAN) Q3 Earnings?

Huntington Bancshares IncorporatedHBAN is scheduled to report its third-quarter 2015 results on Thursday, Oct 22, 2015, before the opening of market.

The Ohio based-bank's second-quarter 2015 core earnings outpaced the Zacks Consensus Estimate. Results were aided by revenue growth and lower provisions, partially offset by higher expenses. Notably, the quarter benefited from the acquisition of Macquarie Equipment Finance.

Will Huntington miss on earnings this quarter? Let's see how things have shaped up.

Factors to Influence Q3

We believe higher expenses could act as a dampener for Huntington's upcoming results. Non-operating expenses rose 7% year over year in 2014 and the increasing trend continued in first-half 2015 as well. Though management noted that non-interest expense is expected to remain close to second-quarter 2015 level for the remainder of 2015, we remain apprehensive given the company's continued investments in technology space and expansion in Michigan with new in-store branch locations in the Meijer Superstore.

Further, we do not expect significant improvement in net interest income, as rates continue to remain low. Net interest margin, too, will likely remain under pressure due to lower yield on assets. However, the company should benefit from its diversified fee income base with favorable growth in service charges.

Overall, credit quality is expected to remain at the current levels. However, given the reduced level of problem assets and credit costs, management expects moderate quarterly volatility. Among others, the quarter could reflect continued growth in both loan and deposit balances.

Activities of Huntington during the quarter were inadequate to win analysts' confidence. As a result, the Zacks Consensus Estimate for the quarter remained stable at 20 cents per share over the last seven days.

Earnings Whispers

Our proven model does not conclusively show that Huntington is likely to beat the Zacks Consensus Estimate in the upcoming release. This 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. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: The Earnings ESP for Huntington is -10.00%. This is because the Most Accurate Estimate of 18 cents stands below the Zacks Consensus Estimate of 20 cents.

Zacks Rank : Huntington's Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise.

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:

Capital One Financial Corporation COF has an earnings ESP of +2.08% and carries a Zacks Rank #3. It is expected to report its third-quarter results on Oct 22.

Ally Financial Inc. ALLY has an earnings ESP of +1.92% and carries a Zacks Rank #2. It is expected to report its third-quarter results on Oct 29.

The earnings ESP for Federated National Holding Company FNHC is +50.00% and it carries a Zacks Rank #1. The company is expected to release its third-quarter results on Oct 29.

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CAPITAL ONE FIN (COF): Free Stock Analysis Report

HUNTINGTON BANC (HBAN): Free Stock Analysis Report

ALLY FINANCIAL (ALLY): Free Stock Analysis Report

FEDERATED NATL (FNHC): 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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