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Will Revenue Growth Aid KeyCorp (KEY) Beat Q1 Earnings? - Analyst Blog

KeyCorp.KEY is scheduled to report its first-quarter 2015 results on Apr 16, before the opening bell.

Last quarter, the company delivered a positive earnings surprise of 7.7% driven by a rise in non-interest income and lower expenses, partly offset by an increase in provision for loan and lease losses.

KeyCorp recorded an earnings beat in three of the trailing four quarters with an average positive surprise of 6.0%.

Will KeyCorp be able to maintain its earnings streak this quarter? Or will it disappoint? Let's see how things have shaped up for this announcement.

Factors to Influence Q1 Results

Though revenues reflected subdued growth in 2014, we believe that improvement in loans and deposits will accelerate the growth rate in the upcoming release. Top line growth is expected to gain momentum in this quarter on the back of higher non-interest income driven by robust investment banking activities.

Further, average loans are expected to show improvement in the quarter owing to the strength in commercial businesses. Moving on to the credit quality metrics, net charge-offs are anticipated to remain below the target range of 40 to 60 basis points owing to favorable economic trends.

On the expense front, KeyCorp has been consistently streamlining operations, diversifying products and exiting non-core/unprofitable businesses to reduce costs and propel efficiency. The company expects costs to be relatively stable on a year-over-year basis in 2015, indicating better expense management for this quarter.

However, net interest margin is expected to remain under strain in the upcoming release due to a persistently low interest-rate environment. Also, elevated provisions may continue to weigh on the company's profitability.

KeyCorp's activities during the quarter were not sufficient to win analysts' confidence. As a result, the Zacks Consensus Estimate remained unchanged at 26 cents per share over the last 7 days.

Earnings Whispers

Our proven model does not conclusively show that KeyCorp 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 KeyCorp is 0.00%. This is because the Most Accurate estimate of 26 cents is at par with the Zacks Consensus Estimate.

Zacks Rank: KeyCorp'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 call.

Stocks to Consider

Here are some finance 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:

Ameriprise Financial, Inc. AMP has an Earnings ESP of +1.28% and carries a Zacks Rank #3. It is scheduled to report results on Apr 22.

SVB Financial Group SIVB has an earnings ESP of +2.24% and carries a Zacks Rank #1. It is slated to release results on Apr 23.

The Earnings ESP for The Blackstone Group L.P. BX is +4.17% and it has a Zacks Rank #2. The company is slated to release results on Apr 16.

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AMERIPRISE FINL (AMP): Free Stock Analysis Report

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SVB FINL GP (SIVB): 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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