Will KeyCorp (KEY) Stock Rally Further Post Q2 Earnings?

KeyCorp (NYSE:KEY) is slated to report second-quarter 2017 results on Jul 20, before the opening bell. Its revenues and earnings are expected to grow year over year.

Last quarter, revenue synergies from the First Niagara deal (completed in Aug 2016) and lower provision for credit losses helped KeyCorp outpace the Zacks Consensus Estimate. However, higher operating expenses were a headwind.

Analysts seem to be optimistic about KeyCorp’s prospects as the company’s second-quarter earnings estimates increased 3% in the last 30 days. The company boasts a decent earnings surprise history, delivering an average beat of 2.1% in the trailing four quarters.

Driven by the strong fundamentals, the company’s share price increased 5.4% in the three months ended Jun 30, 2017, outperforming the Zacks categorized Major Banks industry’s rally of 4%.

Will the stock’s rally continue post second-quarter earnings release? Let’s see how things are shaping up.

Our proven model doesn’t conclusively predict that KeyCorp will be able to beat the Zacks Consensus Estimate as it does not have right combination of two key ingredients — positive Earnings ESP and a Zacks Rank #3 (Hold) or better.

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 KeyCorp is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 34 cents.

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

Factors to Influence Q2 Results

Improving rates should support net interest income (NII) growth: During the quarter, loan demand improved moderately. Per the Federal Reserve’s latest data, loans grew on a sequential basis during the second quarter. Both commercial real estate loans and commercial and industrial loans are anticipated to increase, while consumer loans might fall. This, coupled with higher interest rates should lead to NII growth.

Modest non-interest income growth: We believe KeyCorp’s second-quarter non-interest income will be positively impacted by increasing investment banking income, driven by slightly higher debt placement fees. However, mortgage production is expected to be relatively weak during the quarter.

Decline in expenses should support profitability: KeyCorp has been consistently streamlining operations, diversifying products and exiting unprofitable/non-core businesses. This is expected to keep overall expenses (excluding merger related charges) manageable. Also, management expects cost savings from the Fist Niagara deal to support bottom line marginally.

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 announcements.

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 scheduled 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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