Will Loan Growth Support Huntington (HBAN) Q4 Earnings?

Huntington Bancshares (NASDAQ:HBAN) is scheduled to report fourth-quarter 2018 results on Jan 24, before the opening bell. The company’s results are projected to reflect year-over-year growth in revenues and earnings.

In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate. Higher revenues, continued growth in both loan and deposit balances, and low expenses were among the positives.

Huntington has a decent earnings surprise history, with an average positive surprise of 1.65%, over the trailing four quarters.

However, the company’s activities in the fourth quarter were inadequate to impress analysts. As a result, the Zacks Consensus Estimate for earnings of 31 cents remained unchanged, over the past 30 days. Nonetheless, the figure represents year-over-year growth of 19.2%.

Moreover, the consensus estimate for revenues of $1.16 billion reflects a rise of 4.6% from the prior-year quarter.

Before we take a look at what our quantitative model predicts, let’s check the factors that are expected to impact fourth-quarter results.

Factors That Might Influence Q4 Results

Net Interest Income (NII) Might Disappoint: A decent lending backdrop, particularly in the areas of commercial and industrial, commercial real estate and consumer will offer support to banks’ interest income, while weakness in revolving home equity loans (due to slowdown in originations as well as refinancing activities) will partially offset this. Nevertheless, flattening and sometimes, even inversion of the yield curve during the fourth quarter, is expected to negatively impact net interest margin.

However, rise in interest earning assets is likely to have supported top-line growth. The Zacks Consensus Estimate predicts earnings assets of $97.8 billion, up 4.2% year over year.

Fee Income Might Remain Stable: Investment banking is anticipated to display a disappointing performance for the to-be-reported quarter due to seasonality, as well as a considerable reduction in equity underwriting volumes globally on escalating trade-war fears. A fall in equity issuances across the globe might have resulted from reduced IPOs and follow-on offerings. However, advisory revenues are expected to be on upswing, on escalated volume of closed deals in the fourth quarter.

With the rising interest rates, no major help is expected from the mortgage banking segment. As refinancing activities slowed down during the quarter, mortgage banking revenues are not anticipated to witness much improvement.

Nevertheless, given the continued momentum in customer spending, the usage of credit and debit cards is likely to have helped the company record higher related fees.

Expenses Under Control: Management remains focused on expense management, Also, there were no major outflows during the quarter that might have impacted the firm’s earnings unusually in the to-be-reported quarter.

Notably, the company projects non-interest expenses to be down 2-2.5% in 2018, the impact of which will likely be reflected in the Oct-Dec quarter results.

Here is what our quantitative model predicts:

Huntington has the right combination of the two key ingredients — positive Earnings ESP and a Zacks Rank #3 (Hold) or better — 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.

Earnings ESP: The company has an Earnings ESP of +3.97%. This is a very significant and leading indicator of a likely positive earnings surprise for the company.

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

Stocks that Warrant a Look

Here are some 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.

Ares Capital Corporation (NASDAQ:ARCC) is slated to release results on Feb 12. The company has an Earnings ESP of +1.10% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BOK Financial Corporation (NASDAQ:BOKF) has an Earnings ESP of +2.54% and holds a Zacks Rank of 3. It is slated to report December quarter-end results on Jan 30.

Webster Financial Corporation (NYSE:WBS) has an Earnings ESP of +0.57% and carries a Zacks Rank #3. It is set to release its quarterly numbers on Jan 24.

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