People's United (PBCT) Q2 Earnings: What To Expect?

People's United Financial Inc. (NASDAQ:PBCT) is scheduled to report second-quarter 2015 results on Thursday, Jul 16.

Last quarter, this financial savings and loan institution witnessed more than10% year-over-year rise in earnings, while at the same time managing to beat estimates. Results were aided by higher revenue, partially offset by increased expenses and provisions.

Will People's United fail to impress in the upcoming release after combating the challenges witnessed by the industry in the quarter? Let's see what factors might have influenced the earnings report this time around.

Factors to Influence Q2 Results

Increasing commercial real estate and lending activities from the improving economy is likely to contribute to People’s United’s revenue growth. Notably, the company has a track record of positive loan growth (annualized) for the past 18 consecutive quarters. While continuity of such a trend is likely to drive net interest income in the second quarter, we remain cautious at the same time. We expect to witness a rise in provisions during the quarter given the rapidly growing and diversifying loan portfolio.

Also, net interest margin is predicted to remain under pressure, owing to lower yield on new loans, given the current low rate environment.

Additionally, bank service charges will continue to be impacted due to certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

On a positive note, as reaffirmed by the company during its first-quarter earnings call conference, growth in net interest income from its originated portfolio exceeding lost accretion on the acquired portfolio will likely continue to be a driving factor for subsequent quarters.

Also, commercial banking lending fees is likely to get a boost due to moderate growth in commercial prepayment activity in commercial real estate.

We believe the quarterly results are likely to reflect reducing expenses. This is because increase in expenses owing to seasonality in the first quarter is not likely to repeat in the second quarter. Further, as previously announced, the company intends to close around 10 branches in the remainder of this year and plans to reduce real estate costs by consolidating other facilities. Such efforts are likely to reflect in the company’s expense base.

Activities of People's United during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter remained stable at 21 cents per share over the last 7 days.

Earnings Whispers

Our proven model does not conclusively show that People's United is likely to beat the Zacks Consensus Estimate in the second quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: The Earnings ESP for People's United is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 21 cents.

Zacks Rank: People's United’s Zacks Rank #2 (Buy) increases the predictive power of ESP. But we also need to have a positive ESP to be confident of an earnings surprise call.

Stocks That Warrant a Look

Here are some stocks you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat this quarter:

KeyCorp. (NYSE:KEY) has an earnings ESP of +3.57% and carries a Zacks Rank #2. It is expected to report its second-quarter results on Jul 16.

Comerica Incorporated (NYSE:CMA) has an earnings ESP of +1.35% and carries a Zacks Rank #3. It is expected to report its second-quarter results on Jul 17.

The earnings ESP for Cullen/Frost Bankers, Inc. (NYSE:CFR) is +3.57% and it carries a Zacks Rank #2. The company is expected to release its second-quarter results on Jul 29.

Comerica Incorporated (CMA): Free Stock Analysis Report

KeyCorp (KEY): Free Stock Analysis Report

Cullen/Frost Bankers, Inc. (CFR): Free Stock Analysis Report

People's United Financial, Inc. (PBCT): Free Stock Analysis Report

Original post

Zacks Investment Research