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Will Higher Costs Weigh on Regions Financial (RF) Earnings? - Analyst Blog

Regions Financial CorporationRF is scheduled to report its first-quarter 2015 earnings on Tuesday, Apr 21, 2015, before market opens.

In fourth-quarter 2014, Regions' earnings from continuing operations came in at 14 cents per share, missing the Zacks Consensus Estimate by 7 cents. Lower-than-expected results were driven by higher non-interest expenses and lower top line.

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

What to Expect in Q1?

Higher expenses could act a headwind for the first-quarter 2015. Owing to fresh recruitments made in late 2014, Regions expects to incur around $25 million in 2015 or $6 million per quarter. Further, due to branch consolidation this year, the company is expected to incur around $15 million in the first quarter. We believe these costs are likely to weigh on the company's expense base.

We do not expect significant growth in net interest income due to the persistent low interest rate environment.

Given the company's previously announced posting order process for customer deposit accounts, decline in fee income between $10 million to $15 million each quarter is anticipated, when implemented. We believe a likely occurrence of such a decline in the quarter will weigh on total non-interest income, thereby restricting top-line growth.

However, we believe Regions' non interest income might get support to some extent from its mortgage business. Notably, U.S. banks witnessed a spur in refinance applications due to the reduced mortgage rates in the first quarter. Given such a favorable backdrop, the company might exhibit an improvement in mortgage banking revenue, which contributes to its overall revenues.

Activities of Regions during the quarter were inadequate to win analysts' confidence. As a result, the Zacks Consensus Estimate for the quarter remained stable at 18 cents per share over the last seven days.

Earnings Whispers

Our proven model does not conclusively show that Regions is likely to beat the Zacks Consensus Estimate in the first quarter. 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 Regions is -5.56%. This is because the Most Accurate estimate of 17 cents stands below the Zacks Consensus Estimate of 18 cents.

Zacks Rank : Regions' Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we need to have a positive Earnings ESP to be sure of an earnings beat.

Stocks That Warrant a Look

Here are some stocks you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat this quarter:

Fifth Third Bancorp FITB has an Earnings ESP of +2.70% and a Zacks Rank #3. The company will report results on Apr 21.

The earnings ESP for T. Rowe Price Group, Inc. TROW is +0.89% and it carries a Zacks Rank #3. The company is scheduled to release its first-quarter results on Apr 22.

The earnings ESP for Popular, Inc. BPOP is +9.86% and it carries a Zacks Rank #1. The company is scheduled to release its first-quarter results on Apr 27.

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REGIONS FINL CP (RF): Free Stock Analysis Report

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POPULAR INC (BPOP): 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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