Why An Earnings Beat Is Likely For SunTrust (STI) In Q2

SunTrust Banks, Inc. (NYSE:STI) is slated to report second-quarter 2017 results on Jul 21, before the opening bell. Its revenues and earnings are expected to grow year over year.

Driven by an increase in revenues, SunTrust’s first-quarter earnings outpaced the Zacks Consensus Estimate. However, an increase in provision for credit losses and higher operating expenses were the undermining factors.

However, the company’s business activities and prospects failed to encourage analysts to revise earnings estimates recently. As a result, the Zacks Consensus Estimate of 98 cents for the just-concluded quarter remained stable over the last 30 days.

Nevertheless, SunTrust boasts an impressive earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 2.6%.

The company’s price performance has not been very impressive though. Its shares have gained only 2% year to date, underperforming the Zacks categorized Banks - Major Regional industry’s growth of 5.7%.

Before delving deeper into the factors that are likely to impact the results, let’s check what our quantitative model predicts.

A Positive Surprise in Store?

According to our quantitative model, chances of SunTrust beating the Zacks Consensus Estimate in the to-be-reported quarter are high. This is because it has the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better, which is required to be confident 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 SunTrust is +1.02%. This is because the Most Accurate estimate of 99 cents is more than the Zacks Consensus Estimate of 98 cents.

Zacks Rank: SunTrust currently carries a Zacks Rank #3, which when combined with a positive ESP, increases the chances of an earnings beat.

Factors to Influence Q2 Results

Expected Increase in Net Interest Income (NII): Rising interest rates along with a modest improvement in loan demand in the quarter might have lead to a marginal increase in NII. Especially, the company might have experienced a positive impact of the Mar 2017 rate hike on its margin. Some support is also expected from the June rate hike.

The company expects net interest margin to increase 1–2 bps in second-quarter 2017.

Modest Improvement in Non-Interest Income: SunTrust’s non-interest income should show some improvement, driven by better investment banking activities during the quarter.

Expenses to Decline Slightly: The company’s initiatives to consolidate its branch networks should translate into marginal expense reduction.

Other Stocks that Warrant a Look

Here are a few finance stocks that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat in the upcoming release.

Citizens Financial Group, Inc. (NYSE:CFG) is slated to report second-quarter results on Jul 21. It has an Earnings ESP of +1.70% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fifth Third Bancorp’s (NASDAQ:FITB) Earnings ESP is +2.38% and it carries a Zacks Rank #3. The company is expected to release second-quarter results on Jul 21.

Huntington Bancshares Incorporated (NASDAQ:HBAN) has an Earnings ESP of +4.35% and a Zacks Rank #3. It is scheduled to report second-quarter results on Jul 21.

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