First Interstate BancSystem (FIBK) Earnings Expected to Rise: Should You Buy It?

Wall Street is expecting year-over-year earnings growth on higher revenue when First Interstate BancSystem (FIBK) reports results for the quarter ended March 2019. While this widely known consensus forecast is important for assessing the company’s earnings, a strong factor that could affect its stock price in the near term is how well actual results compare to those estimates.

The stock could rise if these key numbers beat expectations in the upcoming earnings report, due April 25. On the other hand, if they miss expectations, 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 holding company for First Interstate Bank is expected to report quarterly earnings of $0.73 per share in its upcoming report, which would represent a year-over-year change of +7.4%.

Revenue is expected to be $151.84 million, up 12.5% ​​from the same quarter last year.

Estimate revision trend

The consensus EPS estimate for the quarter has been revised up 0.8% over the past 30 days to the current level. This is essentially a reflection of how the analysts covering the aggregate have reassessed their initial estimates during that time.

Investors should note that the total change may not necessarily reflect the direction of each individual analyst’s estimate revisions.

Price, Consensus and EPS Surprise

Whispers about earnings

Estimate revisions ahead of a company’s earnings release provide a guide to business conditions in the period in which the earnings are released. Our proprietary surprise prediction model, the 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ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a newer version of the Zacks Consensus EPS.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 the analysts revising their estimates just before an earnings release have the latest information, which could potentially be more accurate than what they and other contributors to the consensus had previously predicted.

So a positive or negative Earnings ESP reading theoretically indicates a likely deviation of actual earnings from consensus estimates. 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.

It’s important to remember that a negative Earnings ESP reading does not indicate an earnings miss. Our research shows that it’s difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank 4 (Sell) or 5 (Strong Sell).

How are First Interstate BancSystem’s numbers shaping up?

In the case of First Interstate BancSystem, the Most Accurate estimate is higher than the Zacks Consensus Estimate, suggesting that analysts have recently become optimistic about the company’s earnings prospects. As a result, the Earnings ESP is +0.82%.

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

So this combination indicates that First Interstate BancSystem will most likely beat consensus earnings per share estimates.

Are the financial results surprising? Does history matter?

Analysts often consider how well a company has been able to match consensus estimates in the past when calculating their future earnings estimates, so it’s worth looking at the company’s surprise history to assess its impact on the upcoming numbers.

For the last reported quarter, First Interstate BancSystem was expected to post earnings of $0.76 per share when the actual result was $0.76, which comes as no surprise.

The company has failed to beat consensus earnings per share estimates in each of the last four quarters.

Summary

Beating or missing earnings may not be the only reason a stock goes up or down. Many stocks lose ground despite beating earnings because of 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.

First Interstate BancSystem seems like a compelling candidate for earnings outperformance. However, investors should look at other factors when betting on or staying away from this stock ahead of its earnings release.

Want the latest recommendations from Zacks Investment Research? Today you can download the 7 best stocks for the next 30 days. Click to get this free report

First Interstate BancSystem, Inc. (FIBK): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research