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Can Citizens (CFG) Maintain its Earnings Beat Streak in Q2?

Citizens Financial Group, Inc. CFG is scheduled to report second-quarter 2017 results on Jul 21, before the market opens. The company is expected to witness year-over-year growth in revenues and earnings.

Further, Citizens Financial boasts an impressive surprise history. It surpassed earnings estimates in each of the trailing four quarters, with an average positive surprise of 9.1%.

The Providence, RI-based bank’s organic growth was reflected in first-quarter 2017 results, which witnessed continued rise in loan and deposit balances. On the downside, the company recorded increased expenses and provisions.

The stock has gained 3.9% over the last six months versus the Zacks categorized Financial - Savings and Loan industry’s decline of 2.6%.

Citizens Financial Group, Inc. Price and EPS Surprise

Will the rally in stock price continue post second-quarter earnings release? It majorly depends on whether the firm is able to maintain its earnings beat trend.

Why a Likely Positive Surprise?

Our proven model shows that Citizens Financial has the right combination of two key ingredients – positive Earnings ESP and a Zacks Rank #3 (Hold) or better – to increase the odds of an earnings beat.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.70%. This is a major indicator of a likely positive earnings surprise.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Citizens Financial’s Zacks Rank #2 (Buy) when combined with a positive ESP makes us reasonably confident of an earnings beat.

Factors to Drive Better-than-Expected Results

Loan Growth: Though the quarter witnessed slow loan growth due to lack of any tangible progress on the regulatory reform front, slight growth in the loan balances can be expected due to the optimism prevailing in the market. Further, management expects loan growth to be modest on a sequential basis.

Pressure on Net Interest Margin (NIM) Might Ease: The latest hike in interest rates might be successful in easing some margin pressure. However, the contraction in the three-month/10-year Treasury spread might offset some benefits.

Controlled Expenses: Expenses in the second quarter are usually affected seasonally by personnel/benefits related expenses and variable compensation related to mortgage banking activity. However, it is likely that Citizens Financial’s cost base will remain controlled due to its TOP III Efficiency initiatives.

Fee Income to Decline: Fee income might decline in the second quarter as a higher interest rate environment is likely to dampen mortgage banking business. However, improved capital markets are anticipated to be a favorable factor.

Activities of Citizens Financial during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter remained unchanged at 59 cents over the last seven days.

Other Stocks that Warrant a Look

Here are some other stocks you may want to consider, as they have the right combination of elements to post an earnings beat in their upcoming releases.

Lazard Ltd. LAZ is slated to report second-quarter results on Jul 27. It has an Earnings ESP of +7.69% 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 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 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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Fifth Third Bancorp (FITB): Free Stock Analysis Report
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Lazard Ltd. (LAZ): Free Stock Analysis Report
Citizens Financial Group, Inc. (CFG): Free Stock Analysis Report
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