Why Earnings Beat Is Less Likely For BB&T Corp (BBT) In Q2

BB&T Corporation (NYSE:BBT) is slated to report second-quarter 2017 results on Jul 20, before the opening bell. Its revenues and earnings are projected to grow year over year.

Last quarter, BB&T’s earnings surpassed the Zacks Consensus Estimate. Improvement in both net interest income and non-interest income drove the better-than-expected results. However, higher operating expenses remained a headwind.

In fact, BB&T boasts a decent earnings surprise history, having beaten the Zacks Consensus Estimate in three of the trailing four quarters, with an average beat of 4.8%.

However, the company’s activities in the second-quarter were inadequate to win analysts’ confidence. Over the last 30 days, the Zacks Consensus Estimate for the quarter’s earnings has remained stable at 77 cents.

Moreover, despite an improving operating environment and increasing interest rates, BB&T’s price performance has not been impressive. The company’s shares have lost 4.5% year to date, as against the Zacks categorized Banks - Major Regional industry’s growth of 6%.

Earnings Whispers

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

Our proven model does not conclusively predict that BB&T will be able to beat the Zacks Consensus Estimate this time around. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #3 (Hold) or better for this to happen.

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 BB&T is 0.00%. This is because the Most Accurate estimate of 77 cents is in line with the Zacks Consensus Estimate.

Zacks Rank: BB&T has a Zacks Rank #3, which increases the predictive power of ESP. However, we also need to have a positive Earnings ESP to be confident of an earnings beat.

Factors to Influence Q2 Results

Rising Rates to Boost Margin: With the improvement in the rate scenario, BB&T’s net interest margin might have improved in the quarter. The company expects the March rate hike to lead to an increase in core NIM by 2–4 basis points on a sequential basis.

Revenues to Improve Slightly: There was a modest improvement in loan demand in the quarter. The company projects average loans to grow 1–3% sequentially, driven by improvement in commercial, specialized and retail loan portfolios. Higher loan balances might have supported net interest income growth to some extent.

Notably, the company expects NII to improve in the range of 2–4%, given the improved margin assumption. Also, fee income is expected to be up 6–8% year over year.

Expenses Might Increase Modestly: Excluding merger-related and restructuring charges, BB&T expects expenses to remain flat or increase slightly on a year over year basis.

Asset Quality to Support Results: BB&T expects loan loss provision to match net charge-offs (NCOs) in the quarter. Also, management expects NCOs to remain in the range of 0.35–0.45%. Non-performing asset levels will likely remain stable sequentially.

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 their upcoming releases.

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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