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Fee Income Growth to Aid People's United (PBCT) Q4 Earnings

Zacks Equity Research

People's United Financial, Inc. PBCT is scheduled to report fourth quarter and 2019 results on Jan 16. While its revenues are expected to have improved year over year, earnings might have declined.

Before we discuss the factors that might have influenced the results, let’s take a look at how the company performed in the last reported quarter.

People's United posted an earnings beat in third-quarter 2019. Improvement in loans balances, along with higher fee income, was partially offset by elevated expenses.

People's United surpassed estimates on two occasions and posted in-line results in two of the trailing four quarters, the average beat being 2.23%.

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People's United Financial, Inc. Price and EPS Surprise

People's United Financial, Inc. Price and EPS Surprise
People's United Financial, Inc. Price and EPS Surprise

People's United Financial, Inc. price-eps-surprise | People's United Financial, Inc. Quote

The Zacks Consensus Estimate for earnings for the to-be-reported quarter is 33 cents, which suggests a fall of 8.3% from the year-ago reported number. However, the consensus estimate for sales of $488.9 million indicates 16.1% growth.

Factors at Play

Soft Loan Growth: A decent lending scenario — mainly in the areas of commercial real estate and consumer loans — might have supported the bank’s interest income.

Management expects loan portfolio growth in the range of 10% to 12% for 2019, the impact of which is likely to be reflected in the upcoming results as well. This goal excludes the transactional portion of the New York multifamily portfolio, which is in runoff mode.

Muted Net Interest Income (NII): A decent lending scenario during the quarter is likely to have supported NII. Moreover, the company’s net interest margin is expected to have been affected by lower interest rates during the quarter.

Fee Income Growth: On strong retail banking, fee income might have increased for the bank. Also, the quarter witnessed pickup in investment management activities, which is expected to have lent some support. The Zacks Consensus Estimate for investment management fees implies a 5.5% year-over-year improvement.

The consensus estimate for non-interest income is $108 million, indicating 21.8% year-over-year rise.

Additionally, the company projects non-interest income to be up 2-4% for 2019, the impact of which is likely be reflected in fourth-quarter results.

Higher Expenses: People’s United’s inorganic growth strategies are likely to have resulted in higher merger-related costs. Also, with the expansion of operations, compensation and benefits might have risen.

Earnings Whispers

The chances of People’s United beating the Zacks Consensus Estimate in the fourth quarter are high. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing 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 Earnings ESP for People’s United is +0.87%.

Zacks Rank: People’s United currently has a Zacks Rank #3.

Other Stocks That Warrant a Look

The Goldman Sachs Group, Inc. GS is slated to release quarterly results on Jan 15. The company has an Earnings ESP of +1.34% and currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Bank of America Corporation BAC is scheduled to report quarterly earnings on Jan 15. The company, which carries a Zacks Rank of 2 (Buy) at present, has an Earnings ESP of +0.13%.

Earnings ESP for Northern Trust Corporation NTRS is +0.45% and it currently carries a Zacks Rank of 3. The company is set to report quarterly numbers on Jan 22.

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Bank of America Corporation (BAC) : Free Stock Analysis Report
 
Northern Trust Corporation (NTRS) : Free Stock Analysis Report
 
The Goldman Sachs Group, Inc. (GS) : Free Stock Analysis Report
 
People's United Financial, Inc. (PBCT) : Free Stock Analysis Report
 
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