Regions Financial Corporation (RF Quick QuoteRF - Free Report) is scheduled to report second-quarter 2017 results tomorrow, before the opening bell. While revenues and earnings are expected to grow year over year, we can’t conclusively predict a likely earnings beat.

Before we discuss why an earnings beat might not be in store and what could influence the results, let’s take a look at how the company performed in the last quarter.   

The Birmingham, AL-based company’s first-quarter 2017 earnings outpaced the Zacks Consensus Estimate owing to impressive growth in non-interest income and easing margin pressure. However, this was partly offset by escalating expenses.

Notably, this positive performance resulted in an appreciation of the company’s share price. Over the last three months, the stock gained around 7.4%. Also, the Zacks Consensus Estimate remained unchanged over the last 30 days.

Moreover, Regions has an impressive earnings surprise history, as evident from the chart below:

Regions Financial Corporation Price and EPS Surprise

Regions Financial Corporation Price and EPS Surprise | Regions Financial Corporation Quote

Will the upcoming earnings release give a boost to Regions’ stock? This depends largely on whether the firm is able to post a beat in the second quarter. However, our quantitative model doesn’t conclusively point toward an earnings beat this time. Here’s why:

Regions doesn’t have the right combination of the two key ingredients – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) – for increasing its chances of an earnings beat. It should be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Zacks ESP:The Earnings ESP for Regions is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 24 cents. This is a major indicator of a likely positive earnings surprise for the company. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Regions’ Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat.

Factors to Influence Q2 Results

Loan Growth: Per the Federal Reserve’s latest data, loans grew on a sequential basis during the second quarter. Both commercial real estate loans and commercial and industrial loans (C&I) are anticipated to increase, while consumer loans might fall. Therefore, interest income for banks is projected to improve marginally.

In addition, management’s expectations of loan and deposit growth in 2017 will likely be reflected in this quarter. The bank projects average loans to be flat to marginally down on a year-over-year basis, excluding the impact of the third-party indirect-vehicle portfolio. Average deposits are expected to be relatively stable compared to the prior year.

Modest Rise in Net Interest Income (NII): Given the effect of rise in interest rates, Regions should have recorded an increase in NII. Notably, management’s projections of 2017 NII and other financing income to grow in the range of 3–5% are likely to show impact in the second quarter as well. Further, net interest margin is estimated to expand 3–5 basis points in the quarter to be reported.

Non Interest Income Might Escalate: The persistent decline in non-interest income has weighed on the top line for the last few years. However, given the seasonal tailwinds, service charges and payments might escalate lifting fee income for the bank. Moreover, the company anticipates adjusted non-interest income to rise in the range of 1–3% in 2017.

Expenses Might Rise Slightly: Regions’ efficient expense management might decently support the bottom line during the quarter. Owing to the current global macroeconomic headwinds, management’s plan to slash $300 million of core expenses by 2018 is right on track. Further, encouraged by recent increases in market interest rates, Regions expects to eliminate an additional $100 million by 2019. However, the company projects a marginal increase in its expenses, as a result of the investments which it is making for revenue generation.

Stocks That Warrant a Look

Here are some other stocks you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.

Old National Bancorp (ONB Quick QuoteONB - Free Report) has an Earnings ESP of +3.70% and a Zacks Rank #2. It is scheduled to report second-quarter 2017 results on Jul 25. You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntington Bancshares Incorporated (HBAN Quick QuoteHBAN - Free Report) has an Earnings ESP of +4.35% and a Zacks Rank #3. It is slated to report second-quarter results on Jul 21.

Fifth Third Bancorp (FITB Quick QuoteFITB - Free Report) has an earnings ESP of +2.38% and a Zacks Rank #3. It is slated to report second-quarter results on Jul 21.

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