Why An Earnings Beat Is Likely For M&T Bank (MTB) In Q3?

M&T Bank Corporation (NYSE:MTB) is scheduled to report third-quarter 2017 results on Oct 18, before the opening bell. The company’s revenues and earnings are expected to show improvement from the year-ago quarter.

Last quarter, the company surpassed the Zacks Consensus Estimate for earnings. Results benefitted from an improvement in revenues. However, deteriorating credit quality was a major headwind.

Also, M&T Bank has a decent earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with an average positive surprise of 4.7%.

However, activities of the company in the third quarter failed to win analysts’ confidence. As a result, the Zacks Consensus Estimate for earnings of $2.40 has remained stable over the last 30 days. Nevertheless, the figure reflects a year-over-year improvement of 12.8%.

Further, the company’s Zacks Consensus Estimate for sales of $1.43 billion reflects an improvement of 5.7% on a year-over-year basis.

The company’s strong fundamentals have helped its shares gain 43.2% in the past year, outperforming the 38.5% growth for the industry it belongs to.

Will this price performance continue post Q3 earnings? Let’s take a look at what our quantitative model predicts.

A Likely Positive Surprise?

According to our quantitative model, chances of M&T Bank beating the Zacks Consensus Estimate in the third quarter are high. This is because it has the right combination of the two key ingredients – positive Earnings ESP and a Zacks Rank #3 (Hold) or better, which is required to increase 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.

Zacks ESP: The Earnings ESP for M&T Bank is +0.33%.

Zacks Rank: M&T Bank carries a Zacks Rank of 3. This when combined with a positive ESP makes us reasonably confident of a positive earnings surprise.

Factors to Influence Q3 Results

Net Interest Income (NII) to Improve: The third quarter witnessed a moderate improvement in lending — particularly, in the areas of commercial and industrial as well as consumer. Thus, loan growth combined with a rise in interest rates should boost the company’s NII in the quarter.

Relatively Stable Fee Income: Since the overall volume of M&A and equity issuance has remained low during the quarter, the related fees are expected to decline slightly. Expectations of a higher rate environment might have encouraged refinancing activities during the quarter. However, with the refinance boom nearing its end, no major help is expected from this segment and hence mortgage revenue is not expected to witness much improvement.

Nevertheless, as the overall equity markets witnessed some improvement in the quarter, trust income is expected to rise, thereby providing some support to overall fee income growth.

Expenses to Trend Higher: Expenses are expected to trend higher in the upcoming release due to the company’s continued investments in several areas including operational infrastructure and technology.

Other 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.

Interactive Brokers Group, Inc. (NYSE:BK) is slated to release third-quarter results on Oct 17. It has an Earnings ESP of +5.41% and carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here..

The Bank of New York Mellon Corporation (NYSE:BK) has an Earnings ESP of +0.08% and carries a Zacks Rank of 3. It is scheduled to report results on Oct 19.

Associated Banc-Corp (NYSE:ASB) has an earnings ESP of +1.92% and a Zacks Rank of 3. It is also slated to report results on Oct 19.

5 Trades Could Profit "Big-League" from Trump Policies

If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.

Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure.

See these buy recommendations now >>