Fifth Third Bancorp’s (FITB) Earnings Are Expected to Grow: Should you Buy?
Fifth Third Bancorp (FITB), is expected to report a year-over-2018 increase in earnings and higher revenues for its quarter ending December 2022. This consensus outlook provides a solid sense of the company’s earnings picture. But how the actual results compare to these estimates can have an impact on its near-term stock prices.
The stock could move higher if the key numbers are better that expectations. The stock could move lower if the key numbers are not met.
Although management will discuss business conditions on the earnings conference, which will most likely determine the sustainability for the immediate price change as well as future earnings expectations and earnings estimates, it is worthwhile to have a handicapping perspective into the chances of a positive surprise in EPS.
Zacks Consensus Estimate
In its upcoming report, the company will post quarterly earnings at $1 per share. This is a +7.5% increase year-over–year.
Revenues are expected increase by 15.8% to $2.3 billion from the year-ago quarter.
Trend in Estimate Revisions
The consensus EPS estimate has been revised to the current level by 0.06% over the past 30 days. This is basically a reflection on how the covering analysts collectively reassessed initial estimates during this period.
Investors should remember that each analyst may have made different estimates and this could affect the aggregate change.
Earnings Whisper
An estimate revision ahead of a company’s earnings release can provide clues as to the business conditions for that period. This insight lies at the heart of our surprise prediction model, Zacks earnings ESP (Expected Surprising Prediction).
The Zacks Earnings ESP compares most accurate estimates to the Zacks Consensus Estimate. For the quarter, the Most Accurate Estimate uses a newer version of the Zacks Consensus EPS estimate. This is because analysts who revise their estimates before earnings releases have the most recent information. It could be that this could prove to be more accurate than what others contributed to the consensus.
A positive or negative Earnings ESP reading can theoretically indicate the likelihood of earnings that are different from the consensus estimate. The model’s predictive power for positive ESP readings is however limited.
An earnings beat is predicted by a positive Earnings ESP, especially when it’s combined with a Zacks Rank #1 or #2 (Buy), or 3 (Hold). This combination produces a positive surprise almost 70% of the times. A solid Zacks Rank increases the predictive power for Earnings ESP.
Note that a negative Earnings ESP reading doesn’t necessarily mean an earnings miss. Research shows it is hard to predict earnings beats for stocks with negative Earnings-ESP readings or Zacks rank of 4 (Sell), 5 (Strong Sell).
How have the numbers turned out for Fifth Third Bancorp
Fifth Third Bancorp’s Most Accurate Estimate falls below the Zacks Consensus Estimate. This suggests that analysts are becoming bearish about the company’s earnings prospects. The Earnings ESP has been lowered to -1.82%.
However, the stock currently has a Zacks Rank 3rd.
This combination makes it hard to predict with certainty that Fifth Third Bancorp will beat consensus EPS estimates.
Are Earnings Surprise History Any Clues?
Analysts frequently consider how well a company is able match consensus estimates in the recent past, when calculating their future earnings. It’s worth looking at the company’s surprise history to gauge its impact on the future number.
Fifth Third Bancorp was expected to post earnings of $0.98 per stock for the most recent quarter. However, earnings actually came in at $0.93 per share, which is a surprise of -5.10%.
The company beat consensus EPS estimates only once in the past four quarters.
Bottom line
A stock’s ability to move higher or lower may not depend on whether it has an earnings beat or miss. Many stocks lose ground despite an earnings beat. Investors may not be happy with the results. Unexpected catalysts are another reason why some stocks can gain despite a disappointing earnings report.
However, it is possible to increase your chances of success by betting on stocks that exceed earnings expectations. Before each quarter’s quarterly release, it is worth checking the Earnings ESP of a company and Zacks Rank. Use our Earnings ESP filter to find the best stocks you can buy or sell, before they have reported.
Fifth Third Bancorp does not appear to be a strong earnings-beat candidate. Investors need to be mindful of other factors when betting on the stock or staying away before its earnings release.
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