Zacks
0
All posts from Zacks
Zacks in Our Research. Your Success.,

Bank Earnings Are Good, But Fail to Impress

JPMorgan (JPM) and Citigroup (C) handily beat earnings and revenue estimates while Wells Fargo (WFC) beat earnings expectations but modestly missed revenue estimates. The market wasn’t impressed these results, with all three bank stocks ending the otherwise positive Friday session in negative territory. A big reason for the market’s lukewarm reaction to the seemingly positive bank earnings is the soft guidance for the current period, particularly from JPMorgan. This will likely show up in lowered Q3 estimates in the coming days.

Bank stocks struggled in April and May as treasury yields kept going down, but they came back strong in June on the back of a trend reversal in yields and better than expected ‘Stress Test’ results that opened up outsized capital returns opportunities. Most of the headwinds facing banks in Q2 weren’t new; we knew that the capital markets business was soft due to muted volatility and that lower treasury yields would be weighing on margins even as growth in loan portfolios had started decelerating. Estimates had started coming down in the run up to these reports, but not by that much.

Results from these money-center banks and PNC Financial (PNC), which also reported June-quarter results on Friday, offer useful but not very favorable read-throughs for the regional banks and investment banks coming out with results this week.

Finance Sector Scorecard

It is still fairly early, with results from only 4 Finance sector companies in the S&P 500 (out of 95 total) out already. But these 4 companies are the some of the largest in the entire index and account for 22% of the sector’s total market capitalization in the index. Total earnings for these 4 Finance sector companies are up +6.2% from the same period last year on +2.5% higher revenues, with all 4 beating EPS estimates and 3 beating top-line estimates.

The chart below compares the growth pace (earnings and revenue) and proportion of positive surprises for these 4 banks with what we saw from this same group of companies in other recent periods.

What this shows is that the Q2 earnings and revenue growth pace is below what we saw from the same four banks in the preceding quarter, but is otherwise better than other recent historical periods.

Total Q1 earnings for the sector as a whole, combining the reported actual results with the still-to-come estimates, are expected to be up +9.3% from the same period last year on +1.7% higher revenues. The chart below shows the sector’s Q2 earnings growth expectations contrasted with estimates for the following four quarters and actual results for the preceding two periods.

Please note that the sector’s earnings growth expectation has gone up following the better than expected big bank results. It is very likely that the overall growth pace for the sector outpaces the strong showing we saw from the sector in the preceding period.

The table below shows the sector’s Q2 earnings growth expectations at the medium-industry level contrasted with estimates for the following four quarters and actual results for the preceding three periods.

Please note that the Major Banks industry, of which JPMorgan, Wells Fargo and others are part, accounts for roughly 45% of the sector’s total earnings (insurance is the second biggest earnings contributor, accounting for about 25% of the total).

Q2 Earnings Season Scorecard (as of Friday, July 14, 2017)
 
We now have Q2 results from 30 S&P 500 members that combined account for 9.3% of the index’s total market capitalization. Total earnings for these companies are up +13.8% from the same period last year on +6% higher revenues, with 83.3% beating EPS estimates and an equivalent proportion beating revenue estimates.

The charts below compare the Q2 results thus far from the 30 index members with what we had seen from the same group of companies in other recent periods.

This is still a fairly small sample of results, but what has come out already represents an improvement over what we had seen from the same group of index members in other recent periods.

We have a very busy docket of reports this week, with more than 200 companies reporting results, including 68 S&P 500 members. But we can clearly say that the Q2 earnings season is off to a good start. By the end of this week, we will have seen results from almost one-fifth of the S&P 500 members.

The chart below shows the weekly calendar of earnings releases for the entire Q2 earnings cycle. As you can see, we are about two weeks away from the reporting cycle really ramping up.

Q2 Expectations

Total Q2 earnings are expected to be up +6.6% from the same period last year on +4.5% higher revenues. This would follow +13.3% earnings growth in 2017 Q1 on +7.0% revenues growth, the highest growth pace in all most two years.

The table below shows the summary picture for Q2, contrasted with what was actually achieved in Q1.

The chart below shoes Q2 earnings growth expectations contrasted with what is expected in the following three quarters and actual results in the preceding 5 quarters. As you can see in the chart below, this growth pace is expected to continue through the rest of the year.

Note: Sheraz Mian manages the Zacks equity research department. He is an acknowledged earnings expert whose commentaries and analyses appear on Zacks.com and in the print and electronic media. His weekly earnings related articles include Earnings Trends and Earnings Preview. He manages the Zacks Top 10 and Focus List portfolios and writes the Weekly Market Analysis article for Zacks Premium subscribers.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.  Click here for the 6 trades >>

Here is a list of the 214 companies including 68 S&P 500 members reporting this week.


 

Company Ticker Current Qtr Year-Ago Qtr Last EPS Surprise % Report Day Time
TELENOR ASA-ADSTELNYN/A0.27145.45%MondayBTO
Blackrock Inc.BLK5.374.786.28%MondayBTO
Charles SchwabSCHW0.390.35.41%MondayBTO
JB HuntJBHT0.920.925.75%MondayBTO
Netflix Inc.NFLX0.160.095.26%MondayAMC
Select ComfortSCSS0.050.0321.74%MondayAMC
SERVISFIRST BCSSFBS0.440.355.00%MondayAMC
HARLEY-DAVIDSONHOG1.381.556.06%TuesdayBTO
LOCKHEED MARTINLMT3.093.328.70%TuesdayBTO
GOLDMAN SACHSGS3.513.72-4.28%TuesdayBTO
JOHNSON & JOHNSJNJ1.791.743.39%TuesdayBTO
BANK OF AMER CPBAC0.430.3617.14%TuesdayBTO
PROLOGIS INCPLD0.780.61.61%TuesdayBTO
UNITEDHEALTH GPUNH2.381.968.72%TuesdayBTO
COMERICA INCCMA1.070.770.99%TuesdayBTO
PROGRESSIVE CORPGR0.60.29-1.47%TuesdayBTO
ERICSSON LM ADRERIC0.050.1-1000.00%TuesdayBTO
SYNOVUS FINL CPSNV0.590.4911.76%TuesdayBTO
MEDIDATA SOLUTNMDSO0.170.1381.82%TuesdayBTO
NOVARTIS AG-ADRNVS1.161.222.73%TuesdayBTO
TILE SHOP HLDGSTTS0.160.1414.29%TuesdayBTO
ANGIODYNAMICSANGO0.160.1926.67%TuesdayBTO
MERCANTILE BANKMBWM0.440.466.98%TuesdayBTO
NEOGEN CORPNEOG0.320.260.00%TuesdayBTO
WASH FEDL INCWAFD0.480.474.44%TuesdayBTO
TD AMERITRADEAMTD0.410.39-2.44%TuesdayBTO
Kinder MorganKMI0.140.15-5.56%TuesdayAMC
INTL BUS MACHIBM2.732.951.71%TuesdayAMC
NAVIENT CORPNAVI0.430.47-16.28%TuesdayAMC
CSX CORPCSX0.590.4718.60%TuesdayAMC
UNITED CONT HLDUAL2.472.6110.81%TuesdayAMC
LEGACY TX FINLLTXB0.560.5-36.21%TuesdayAMC
HANMI FINL CPHAFC0.450.44-2.27%TuesdayAMC
ADTRAN INCADTN0.220.2215.38%TuesdayAMC
RENASANT CORPRNST0.560.593.77%TuesdayAMC
EXPONENT INCEXPO0.410.38-15.22%TuesdayAMC
AMER MOVIL-ADRAMX0.320.1365.62%TuesdayAMC
PZENA INVESTMNTPZN0.120.1-7.69%TuesdayAMC
TESSCO TECH INCTESS0.040.0175.00%TuesdayAMC
UTD COMM FIN CPUCFC0.140.11-16.67%TuesdayAMC
UNIVL FST PRODSUFPI1.851.640.00%TuesdayAMC
WINTRUST FINLWTFC0.980.99.89%TuesdayAMC
HANCOCK HLDG COHBHC0.670.5910.53%TuesdayAMC
FULTON FINLFULT0.260.238.70%TuesdayAMC
PREFERRED BANKPFBC0.750.611.43%TuesdayAMC
PINNACLE FIN PTPNFP0.80.757.79%TuesdayAMC
INTERACTIVE BRKIBKR0.330.4-12.82%TuesdayAMC
GRAINGER W WGWW2.622.89-4.32%WednesdayBTO
MORGAN STANLEYMS0.760.7511.11%WednesdayBTO
US BANCORPUSB0.840.832.50%WednesdayBTO
M&T BANK CORPMTB2.282.0710.82%WednesdayBTO
TEXTRON INCTXT0.550.660.00%WednesdayBTO
NORTHERN TRUSTNTRS1.241.061.87%WednesdayBTO
DIEBOLD INCDBD0.120.43700.00%WednesdayBTO
AVANGRID INCAGR0.370.327.35%WednesdayBTO
FIRST COMMTY CPFCCO0.260.2613.04%WednesdayBTO
UNION BANKSHARSUBSH0.470.442.33%WednesdayBTO
COMMUN TRUST BCCTBI0.670.66-1.54%WednesdayBTO
DONEGAL GRP -ADGICA0.240.31N/AWednesdayBTO
VOLVO AB-BVLVLY0.320.1236.84%WednesdayBTO
ASML HOLDING NVASML10.9313.13%WednesdayBTO
AB ELECTROLUXELUXYN/A0.91N/AWednesdayBTO
DISH NetworkDISH0.750.8813.43%WednesdayBTO
CH ROBINSON WWDCHRW0.917.50%WednesdayAMC
QUALCOMM INCQCOM0.671.0314.29%WednesdayAMC
SL GREEN REALTYSLG1.623.410.00%WednesdayAMC
AMER EXPRESS COAXP1.452.14.69%WednesdayAMC
UTD RENTALS INCURI2.272.063.16%WednesdayAMC
CROWN CASTLECCI1.151.166.90%WednesdayAMC
T-MOBILE US INCTMUS0.360.2531.43%WednesdayAMC
STEEL DYNAMICSSTLD0.630.583.80%WednesdayAMC
LASALLE HTL PRPLHO0.820.954.65%WednesdayAMC
TEXAS CAP BCSHSTCBI0.940.78-9.09%WednesdayAMC
ALCOA CORPAA0.59N/A14.55%WednesdayAMC
UMPQUA HLDGS CPUMPQ0.270.31-19.23%WednesdayAMC
BLACK KNGHT FINBKFS0.320.290.00%WednesdayAMC
BANCORPSOUTHBXS0.40.392.63%WednesdayAMC
CVB FINLCVBF0.260.234.00%WednesdayAMC
KAISER ALUMINUMKALU1.011.0235.71%WednesdayAMC
SLM CORPSLM0.160.1240.00%WednesdayAMC
BERKSHIRE HILLSBHLB0.570.540.00%WednesdayAMC
CATHAY GENL BCPCATY0.630.440.00%WednesdayAMC
GUARANTY BANCRPGBNK0.350.299.38%WednesdayAMC
PLEXUS CORPPLXS0.720.7610.53%WednesdayAMC
CENTRAL VLY COMCVCY0.310.5525.00%WednesdayAMC
FIRST CT BANCRPFBNK0.330.2233.33%WednesdayAMC
FNF GROUPFNF0.720.7413.51%WednesdayAMC
BLACKHAWK NETWKHAWK-0.250.2746.67%WednesdayAMC
PTC INCPTC0.170.19-25.00%WednesdayAMC
RLI CORPRLI0.540.61-8.33%WednesdayAMC
SIMMONS FIRST ASFNC0.790.82-12.35%WednesdayAMC
AEHR TEST SYSAEHR-0.04-0.23-100.00%WednesdayAMC
CONSOL TOMOKACTO0.250.2818.85%WednesdayAMC
DATAWATCH CORPDWCH-0.06-0.4514.29%WednesdayAMC
NVE CORPNVEC0.660.65-12.68%WednesdayAMC
MILLICOM INTLMIICFN/A0.04N/AWednesdayAMC
CDN PAC RLWYCP2.061.590.00%WednesdayAMC
SAREPTA THERAPSRPT-0.92-1.3514.12%WednesdayAMC
CROWN HLDGS INCCCK1.091.192.86%WednesdayAMC
TRIUMPH BANCORPTBK0.330.25-94.44%WednesdayAMC
VALMONT INDSVMI1.931.853.70%WednesdayAMC
WESBANCO INCWSBC0.620.590.00%WednesdayAMC
TRISTATE CP HLDTSC0.270.248.33%WednesdayAMC
COHEN&STRS INCCNS0.490.462.17%WednesdayAMC
EAGLE BCP INCEGBN0.760.715.48%WednesdayAMC
GREAT SOUTH BCPGSBC0.80.896.58%WednesdayAMC
FIRST SOURCE CPSRCE0.610.568.77%ThursdayN/A
ADVA OPTICALADVOF0.2N/AN/AThursdayN/A
BANCFIRST OKLABANF1.151.120.35%ThursdayN/A
DANAHER CORPDHR0.971.251.19%ThursdayBTO
PPG INDS INCPPG1.81.853.05%ThursdayBTO
SNAP-ON INCSNA2.552.362.14%ThursdayBTO
BB&T CORPBBT0.770.711.37%ThursdayBTO
KEYCORP NEWKEY0.340.2714.29%ThursdayBTO
DOVER CORPDOV10.8712.90%ThursdayBTO
TRAVELERS COSTRV2.082.2-10.00%ThursdayBTO
BANK OF NY MELLBK0.840.760.00%ThursdayBTO
GENUINE PARTSGPC1.311.282.86%ThursdayBTO
NUCOR CORPNUE1.070.73-2.63%ThursdayBTO
ALLIANCE DATAADS3.473.280.00%ThursdayBTO
ABBOTT LABSABT0.60.5511.63%ThursdayBTO
UNION PAC CORPUNP1.371.177.32%ThursdayBTO
PHILIP MORRISPM1.231.15-4.85%ThursdayBTO
OMNICOM GRPOMC1.391.361.04%ThursdayBTO
SHERWIN WILLIAMSHW4.554.069.66%ThursdayBTO
FNB CORPFNB0.230.220.00%ThursdayBTO
MARINEMAX INCHZO0.680.57-35.29%ThursdayBTO
MONRO MUFFLERMNRO0.540.50.00%ThursdayBTO
KB FINL GRP-ADRKBN/A1.31N/AThursdayBTO
CHECK PT SOFTWCHKP1.110.972.80%ThursdayBTO
WABCO HOLDINGSWBC1.541.432.08%ThursdayBTO
POLARIS INDUSPII1.081.097.14%ThursdayBTO
BLACKSTONE GRPBX0.590.4418.84%ThursdayBTO
SONOCO PRODUCTSSON0.710.733.51%ThursdayBTO
WNS HLDGS-ADRWNS0.370.355.41%ThursdayBTO
HOME BANCSHARESHOMB0.330.313.13%ThursdayBTO
POOL CORPPOOL2.241.982.56%ThursdayBTO
S&T BANCORP INCSTBA0.550.49-1.89%ThursdayBTO
AMER RIVER BSHAMRB0.20.19-10.00%ThursdayBTO
LAKELAND BANCRPLBAI0.270.260.00%ThursdayBTO
MGIC INVSTMT CPMTG0.250.2629.17%ThursdayBTO
VERITEX HLDGSVBTX0.20.29-9.09%ThursdayBTO
ABB LTD-ADRABB0.310.37.69%ThursdayBTO
SAP AG ADRSAP1.030.76-19.30%ThursdayBTO
SCHOLASTIC CORPSCHL1.091.22-44.00%ThursdayBTO
TRINITY BIOTECHTRIB0.030.0616.67%ThursdayBTO
GATX CORPGATX1.11.4933.33%ThursdayBTO
ROGERS COMM CLBRCI0.720.626.98%ThursdayBTO
NEUROMETRIX INCNURO-2.83-42.96-85.71%ThursdayBTO
UNILEVER PLCULN/AN/AN/AThursdayBTO
EAST WEST BCEWBC0.810.7117.33%ThursdayBTO
SANDY SPRINGSASR0.580.4416.67%ThursdayBTO
UNILEVER N VUNN/AN/AN/AThursdayBTO
CAPITAL ONE FINCOF1.91.76-9.33%ThursdayAMC
SKYWORKS SOLUTNSWKS1.421.152.31%ThursdayAMC
EBAY INCEBAY0.360.367.50%ThursdayAMC
PEOPLES UTD FINPBCT0.230.230.00%ThursdayAMC
INTUITIVE SURGISRG4.864.8617.63%ThursdayAMC
MICROSOFT CORPMSFT0.710.695.80%ThursdayAMC
VISA INC-AV0.810.698.86%ThursdayAMC
CINTAS CORPCTAS1.081.084.72%ThursdayAMC
E TRADE FINL CPETFC0.480.4823.08%ThursdayAMC
NCR CORP-NEWNCR0.750.7221.74%ThursdayAMC
WIPRO LTD-ADRWIT0.060.067.69%ThursdayAMC
ASSOC BANC CORPASB0.360.319.38%ThursdayAMC
MAXIM INTG PDTSMXIM0.620.497.69%ThursdayAMC
MB FINANCL INCMBFI0.640.585.26%ThursdayAMC
BRANDYWINE RTBDN0.340.320.00%ThursdayAMC
SKECHERS USA-ASKX0.450.489.09%ThursdayAMC
WESTERN ALLIANCWAL0.730.621.45%ThursdayAMC
QCR HLDGS INCQCRH0.660.557.94%ThursdayAMC
ATHENAHEALTH INATHN0.070.06-9.09%ThursdayAMC
COBIZ FINL INCCOBZ0.210.210.00%ThursdayAMC
DIGITALGLOBEDGI-0.050.17-100.00%ThursdayAMC
MANHATTAN ASOCMANH0.440.4614.29%ThursdayAMC
MARTEN TRANSMRTN0.150.1619.05%ThursdayAMC
RESOURCES CNCTNRECN0.220.23-35.71%ThursdayAMC
BADGER METERBMI0.350.3215.38%ThursdayAMC
INDEP BK MASSINDB0.810.789.86%ThursdayAMC
AMER NATL BNKSHAMNB0.50.4711.90%ThursdayAMC
CEMENTOS PACASMCPAC0.140.09-45.45%ThursdayAMC
EQUITY BANCSHRSEQBKN/A0.347.14%ThursdayAMC
SENSIENT TECHSXT0.870.843.80%ThursdayAMC
IBERIABANK CORPIBKC1.121.185.15%ThursdayAMC
GLACIER BANCORPGBCI0.440.40.00%ThursdayAMC
GRUPO AEROP-ADRASR1.951.613.40%ThursdayAMC
NATIONAL BK HLDNBHC0.30.1525.00%ThursdayAMC
ACCESS NATL CPANCX0.390.46-25.64%FridayN/A
SCHLUMBERGER LTSLB0.30.230.00%FridayBTO
GENL ELECTRICGE0.250.5123.53%FridayBTO
MOODYS CORPMCO1.321.319.51%FridayBTO
REGIONS FINL CPRF0.240.24.55%FridayBTO
SUNTRUST BKSSTI0.980.893.57%FridayBTO
FIFTH THIRD BKFITB0.420.40.00%FridayBTO
HUNTINGTON BANCHBAN0.230.21-4.55%FridayBTO
SYNCHRONY FINSYF0.580.58-17.57%FridayBTO
COLGATE PALMOLICL0.720.71.52%FridayBTO
CITIZENS FIN GPCFG0.590.4619.61%FridayBTO
KANSAS CITY SOUKSU1.261.220.00%FridayBTO
HONEYWELL INTLHON1.781.662.47%FridayBTO
BANCO LATINOAMEBLX0.650.57-11.76%FridayBTO
GENTEX CORPGNTX0.320.36.45%FridayBTO
AUTOLIV INCALV1.481.758.55%FridayBTO
ENCANA CORPECA0.040.1175.00%FridayBTO
DEL FRISCOS RSTDFRG0.180.19-4.76%FridayBTO
MOBILE MINI INCMINI0.260.250.00%FridayBTO
AMERIS BANCORPABCB0.650.571.69%FridayBTO
SOUTH STATE CPSSB1.181.181.77%FridayBTO
CONTROLADORA VLVLRS-0.050.49-195.83%FridayBTO
MCCLATCHY CO-AMNI-0.6-1.89158.46%FridayBTO
REPUBLIC BCP KYRBCAAN/A0.4N/AFridayBTO
WEBSTER FINL CPWBS0.60.538.77%FridayBTO
METSO CORP -ADRMXCYYN/A0.08N/AFridayBTO
VODAFONE GP PLCVODN/AN/AN/AFridayBTO

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Wells Fargo & Company (WFC): Free Stock Analysis Report
 
PNC Financial Services Group, Inc. (The) (PNC): Free Stock Analysis Report
 
J P Morgan Chase & Co (JPM): Free Stock Analysis Report
 
Citigroup Inc. (C): Free Stock Analysis Report
 
To read this article on Zacks.com click here.