Fifth Third Bancorp’s (FITB) second-quarter earnings are expected to decline

Wall Street expects year-over-year earnings to decline on higher revenues when Fifth Third Bancorp (FITB) reports earnings for the quarter ended June 2022. While this widely known consensus outlook is important in assessing the company’s earnings picture, a significant factor that could have an impact on a company’s short-term share price is to compare actual results with these estimates.

Shares could move higher if these key numbers meet expectations in the upcoming earnings report, due on July 21. On the other hand, if these key numbers are not met, the stock could fall.

While the durability of the immediate price change and future earnings expectations will depend largely on management’s discussion of business conditions during the earnings conference call, it is worth assessing the likelihood of an upside earnings per share surprise.

Zacks Consensus Estimate

The company is expected to post quarterly earnings of $0.87 per share in its upcoming report, which would represent a year-over-year change of -7.5%.

Revenue is expected to be $2.05 billion, up 5.2% from the prior-year quarter.

Estimate revision trend

The consensus EPS estimate for the quarter has been revised up 1.71% over the past 30 days to current levels. This essentially reflects how the analysts covering the data collectively reassessed their initial estimates during this period.

Investors should note that the aggregate change does not necessarily reflect the direction of each lead analyst’s estimate revisions.

Whisper about earnings

Estimate revisions prior to a company’s earnings release provide an indication of business conditions during the earnings release period. Our proprietary surprise forecast model – Zacks Earnings ESP (Expected Surprise Prediction) – has this insight at its core.

The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; The Most Accurate Estimate is a newer version of the Zacks Consensus EPS. The idea is that analysts revising their estimates just before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had previously predicted.

Thus, a positive or negative Earnings ESP reading theoretically indicates a likely deviation of actual earnings from the consensus estimate. However, the model’s predictive power is only significant for positive ESP readings.

A positive Earnings ESP is a strong predictor of an earnings beat, especially when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold). Our research shows that stocks with this combination deliver a positive surprise almost 70% of the time, and a solid Zacks Rank actually boosts the predictive power of Earnings ESP.

Please note that a negative Earnings ESP reading does not indicate a missed profit. Our research shows that it is difficult to predict earnings beats with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Ranks of 4 (Sell) or 5 (Strong Sell).

How have the numbers changed at Fifth Third Bancorp?

In the case of Fifth Third Bancorp, the Most Accurate Estimate is lower than the Zacks Consensus Estimate, suggesting that analysts have recently become bearish on the company’s earnings outlook. This has resulted in an Earnings ESP of -0.14%.

On the other hand, the company’s stock currently has a Zacks Rank #3.

So this combination makes it difficult to confidently predict that Fifth Third Bancorp will beat the consensus EPS estimate.

Does the history of surprising results hold any clue?

When calculating estimates of a company’s future earnings, analysts often consider how well the company has been able to match previous estimates. So it’s worth taking a look at the history of surprises to assess its impact on the upcoming issue.

For the last reported quarter, it was expected that Fifth Third Bancorp would post earnings of $0.70 per share when it actually produced earnings of $0.69, delivering a surprise of -1.43%.

The company has topped consensus earnings per share estimates three times over the last four quarters.

Bottom Line

Beating or missing earnings may not be the only basis for a stock rising or falling. Many stocks lose ground despite beating gains due to other factors that disappoint investors. Similarly, unforeseen catalysts help many stocks gain despite missing earnings.

That said, betting on stocks that are expected to beat earnings expectations increases the odds of success. That’s why it’s worth checking a company’s Earnings ESP and Zacks Rank ahead of its quarterly earnings release. Be sure to use our Earnings ESP Filter to discover the best stocks to buy or sell before they release.

Fifth Third Bancorp doesn’t seem like a compelling candidate for better financial results. However, investors should pay attention to other factors when betting on these stocks or staying away from them ahead of the earnings release.

Expected results of an industry player

Among the stocks in the Zacks Banks – Major Regional industry, Comerica Incorporated (CMA) is expected to soon post earnings of $1.77 per share for the quarter ending June 2022. This estimate indicates a year-over-year change of -23.7%. Revenue for the quarter is expected to be $805.53 million, up 7.6% from the year-ago quarter.

Over the last 30 days, the consensus EPS estimate for Comerica Incorporated has been revised 13.8% to the current level. Nevertheless, the company now has an Earnings ESP of 0.00%, which reflects an equal Most Accurate Estimate.

Combined with the Zacks Rank #1 (Strong Buy), this Earnings ESP makes it difficult to clearly predict that Comerica Incorporated will beat consensus EPS estimates. The company has surpassed consensus EPS estimates three times over the last four quarters.

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