Regions Financial (RF) Q1 Earnings: A Beat in the Cards?

Regions Financial RF is scheduled to report first-quarter 2018 results on Apr 20, before the opening bell. Both revenues and earnings are estimated to rise year over year, with a likely earnings beat in the cards.

Before we discuss why an earnings beat is likely and what could influence the results, let’s take a look at how the company performed in the last reported quarter.    

This Birmingham, AL-based company’s fourth-quarter 2017 earnings outpaced the Zacks Consensus Estimate and compared favorably with the prior-year quarter’s earnings as well. Easing margin pressure and higher revenues were the positive factors. Moreover, credit quality recorded significant improvement. However, lower loans and deposits balance were the undermining factors. In addition, expenses escalated.

Notably, post earnings, an appreciation in the company’s share price were recorded. For the three-month period ended Mar 31, 2018, the stock gained around 7.5%.

Also, the Zacks Consensus Estimate remained unchanged at 31 cents over the last 60 days, reflecting a year-over-year improvement of nearly 34.8%. The Zacks Consensus Estimate for sales of $1.44 billion indicates around 5% growth from the prior-year quarter.

In addition, Regions is expected to record marginal rise, on a sequential basis, in average interest-earning assets as the Zacks Consensus Estimate for the to-be-reported quarter is $109.5 billion.

Regions has an impressive earnings surprise history, as evident from the chart below:
 

Regions Financial Corporation Price and EPS Surprise

Regions Financial Corporation Price and EPS Surprise | Regions Financial Corporation Quote

Will the upcoming earnings release give a boost to Regions’ stock? This depends largely on whether or not the firm is able to post a beat in the first quarter. Notably, our quantitative model predicts a likely earnings beat this time. Here’s why:

Our proven model indicates that chances of Regions beating the Zacks Consensus Estimate are high as it has the right combination of the two key ingredients — 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.

Zacks ESP: The Earnings ESP is currently pegged at +1.21%.

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

Factors to Influence Q1 Results

Loan Growth: Per the Fed’s latest data, loans are expected to improve slightly on a sequential basis during the quarter to be reported. Particularly, weakness in revolving home equity loans might offset growth in commercial and industrial (C&I), consumer and overall real estate loans to some extent.

In addition, management’s expectations of loan and deposit growth in 2018 will likely be reflected in this quarter. The bank projects average loans to be up in low-single digits on a year-over-year basis, excluding the impact of the third-party indirect-vehicle portfolio.

Modest Rise in Net Interest Income (NII): Given the effect of rise in interest rates, Regions is expected to have recorded an increase in NII. Notably, management’s projections of the 2018 NII and other financing income to rise in the range of 3-5% are likely to show impact in the first quarter.

Non Interest Income Might Escalate: The persistent decline in non-interest income has weighed on the top line for the last few years. Moreover, seasonally lower fee income might be experienced during the quarter. Nevertheless, adjusted non-interest income is estimated to improve 3-6% in 2018.

Notably, the Zacks Consensus Estimate for capital market revenues is estimated to decline 23.7% sequentially to $42.7 million, while commercial credit fee income is projected to increase slightly to $18.3 million.

Expenses Might Rise Slightly: Regions’ efficient expense management might decently support the bottom line during the quarter. Notably, the company is on track for a $400-million expense reduction by 2019. While investing in revenue-generating areas, the company intends to keep expenses stable. Notably, in the first quarter, seasonally higher personnel expenses are expected.

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.

The Earnings ESP for The Bank of New York Mellon Corporation BK is +0.21% and the stock carries a Zacks Rank of 3. The company is scheduled to release first-quarter results on Apr 19. You can see the complete list of today’s Zacks #1 Rank stocks here.

BB&T Corporation BBT has an Earnings ESP of +1.43% and carries a Zacks Rank of 3. It is slated to report results on Apr 19.

Synovus Financial Corp. SNV has an Earnings ESP of +0.38% and carries a Zacks Rank of 3. It is scheduled to report results on Apr 24.

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