What to Expect From Fifth Third (FITB) in Q3 Earnings?

Fifth Third Bancorp FITB is scheduled to report third-quarter 2018 results on Oct 23, before the opening bell. The bank’s results are anticipated to reflect year-over-year growth in revenues and earnings.

Also, the company has a decent earnings surprise history. It topped earnings in three of the trailing four quarters, the average positive earnings surprise being 9.98%.

In the last reported quarter, the bank’s earnings had surpassed the Zacks Consensus Estimate. Results were supported by increase in net interest income, along with significant decline in provisions, and a strong capital position. Expanding net interest margin and rising loans balance remain key positives. However, rise in expenses was an undermining factor.

Fifth Third’s shares have lost around 2.7% in the three-month period ended Sep 30, 2018, compared with the industry’s growth of 2.4%.

Will the upcoming earnings release give a boost to Fifth Third’s stock? That depends largely on whether or not the firm is able to impress the market with its third-quarter results.
 

Fifth Third Bancorp Price and EPS Surprise

Fifth Third Bancorp Price and EPS Surprise | Fifth Third Bancorp Quote

Factors to Influence Q3 Results

Steady Net Interest Income Growth: A modest increase in lending — mainly in the areas of commercial and industrial, and consumer — is expected to have led to improvement in net interest income (NII). A rise in interest rates will provide some support despite flattening of the yield curve in the Sep-end quarter.

Management expects NII of nearly $1.04 billion in the quarter. NIM is projected to remain flat sequentially.

Notably, commercial loans and leases are expected to have climbed 3% in the third quarter and 4% in 2018, including the impact of the planned run-off of national leasing business. Around 2% growth (excluding auto balances) is projected for consumer loans in 2018, which is to be reflected in the to-be-reported quarter.

Fee Income Might Rise Slightly: Fifth Third’s focus on strengthening its fee income base through the North Star initiatives is likely to have lent support. Moreover, the trend of consumer spending was strong during the quarter under review, which will likely have boosted the bank’s credit and debit card revenues. However, poor mortgage banking revenues during the quarter are anticipated to have offset the positives to some extent.

For the Jul-Sep quarter, the company expects non-interest income to be $600 million, up nearly 6% from the second quarter. Notably, corporate banking revenues are likely to have remained flat sequentially.

Expenses Might Flare Up Slightly: Fifth Third’s ongoing strategic investments in several areas, such as technology, will escalate expenses. However, the company might be successful in offsetting this upsurge through its North Star initiatives to some extent.

For the Jul-Sep quarter, the company expects non-interest expenses to reflect decline of 1% sequentially.

Here is what our quantitative model predicts:

Our proven model shows that the company has the combination of the two key ingredients for a possible earnings beat — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold).

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

Earnings ESP: The Earnings ESP is currently pegged at +0.31%. This is a very significant and leading indicator of a likely positive earnings surprise for the company.

Zacks Rank: The combination of Fifth Third’s Zacks Rank #3 and a positive ESP makes us confident of an earnings beat.  

Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into an earnings announcement.

The Zacks Consensus Estimate for earnings of 63 cents reflects a 31.3% jump on a year-over-year basis. Further, the Zacks Consensus Estimate for sales of $1.63 billion indicates 5.6% increase from the prior-year quarter.

Stocks That Warrant a Look

Here are some other stocks you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.

Franklin Resources, Inc. BEN is slated to release results on Oct 25. The company has an Earnings ESP of +0.68% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Cullen/Frost Bankers, Inc. CFR is +0.07% and it also carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Oct 25.

T. Rowe Price Group, Inc. TROW has an Earnings ESP of +0.78% and holds a Zacks Rank of 2. It is scheduled to report results on Oct 25.

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Fifth Third Bancorp (FITB) : Free Stock Analysis Report
 
Cullen/Frost Bankers, Inc. (CFR) : Free Stock Analysis Report
 
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T. Rowe Price Group, Inc. (TROW) : Free Stock Analysis Report
 
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