Muted Lending, Low Rates To Hurt Comerica (CMA) Q3 Earnings

Comerica Incorporated (NYSE:CMA) (NYSE:C) is scheduled to report third-quarter 2019 results before the opening bell on Oct 16. While the company’s earnings are expected to have grown year over year, revenues might have declined.

The company’s second-quarter results were affected by fall in deposits, and higher provisions. However, robust organic growth on rise in revenues, higher loans and lower expenses were positives.

Notably, the company boasts an impressive earnings surprise history. It surpassed estimates in three of the trailing four quarters, the average positive surprise being 2.6%.

Comerica Incorporated Price and EPS Surprise

Comerica Incorporated price-eps-surprise | Comerica Incorporated Quote

Notably, the Zacks Consensus Estimate for earnings for the quarter is $1.91, which suggests improvement of 2.7% from the year-ago reported number. However, the consensus estimate for sales of $831.3 million indicates slight decline.

Factors to Drive Results

Disappointing Net Interest Income (NII) : Per the Fed’s latest data, commercial and industrial, and real estate lending activities slowed down in the third quarter, thereby affecting NII. Also, the Fed’s interest rate cuts along with flattening of the yield curve might have hurt Comerica’s net interest margin.

However, the Zacks Consensus Estimate for average earning assets of $65.7 billion for the quarter indicates slight year-over-year growth.

Slight Growth in Card Fees: Consumer spending remained decent in the third quarter, resulting in usage of debit/credit cards and merchant payment processing services. Thus, card fees (a major contributor to fee income in 2018) might have lent support to its top line in to-be-reported quarter.

Controlled Expenses: The company’s GEAR Up initiatives target to keep expenses under control. However, some impact of technological investment and restructuring charges is likely to have persisted.

Stable Credit Quality: Credit quality is likely to have remained decent on the back of an improving economy. The consensus estimate suggests nearly 1% decline in non-performing assets and loans from the year-ago reported figure.

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

The chances of Comerica beating the Zacks Consensus Estimate in the third 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 -0.32%.

Zacks Rank: Comerica currently has a Zacks Rank #4 (Sell).

Stocks to Consider

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 time around.

The Earnings ESP for BancorpSouth Bank (NYSE:BXS) is +2.61% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Oct 21.

Citigroup (NYSE:C) is scheduled to release results on Oct 15. The company has an Earnings ESP of +0.55% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

M&T Bank Corporation (NYSE:MTB) is scheduled to release results on Oct 17. The company, which carries a Zacks Rank of 3, has an Earnings ESP of +0.34%.

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