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HSBC to Report Q3 Earnings: What's in Store for the Stock?

Zacks Equity Research
Updated

HSBC Holdings plc HSBC is scheduled to announce third-quarter 2017 results on Oct 30, before the market opens. Its earnings and revenues are projected to improve year over year.

Last quarter, results benefited from stable revenues and a fall in loan impairment charges. Also, driven by steady success in its cost-saving initiatives, operating expenses fell marginally.

Activities of the company in the third quarter failed to win analysts’ confidence. As a result, the Zacks Consensus Estimate for earnings of 95 cents remained stable over the last seven days. Nevertheless, the figure reflects significant improvement on a year-over-year basis.

The Zacks Consensus Estimate for sales is $12.98 billion for the to-be-reported quarter, which is expected to witness a jump of 36.5%.

Looking at the price performance, HSBC stock has gained 22% year to date, outperforming the 20.1% rally of its industry.



So, what to expect from HSBC this earnings season? Let's see check out the factors might have affected the earnings in the quarter.

Factors to Influence Q3 Results

Investment banking to modestly support revenues: Driven by improving market conditions and chances of continued rise in interest rates in the future, the quarter witnessed an increase in debt issuance. Further, the quarter is likely to record a slight improvement in equity issuance despite seasonality. So, both debt and equity underwriting fees for HSBC are projected to rise in the to-be-reported quarter.

Further, with the overall improvement in global M&A scenario during the quarter, HSBC is expected to generate decent advisory fees.

Rise in loan demand to support interest income: While a low interest rate environment across several major economies continue hampering interest income growth, increase in loan demand is likely to offset it to some extent. So, HSBC should report a modest improvement in interest income.

Costs to remain manageable: HSBC has been restructuring its operations. These efforts are expected improve the bank’s operating efficiency and trim costs. However, legal and other regulatory expenses are bound to adversely affect its bottom line.

Trading income to decline due to lack of volatility: For the major part of the quarter, trading activities remained sluggish, largely due to low volatility in both bond and equity markets. Therefore, HSBC will likely report dismal trading revenues.

Now, let’s check what our quantitative model predicts.

According to our quantitative model, it cannot be conclusively predicted if HSBC will be able to beat the Zacks Consensus Estimate this time. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — 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.

Zacks ESP: The Earnings ESP for HSBC is 0.00%.

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

Stocks That Warrant a Look

Here are a few 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.

Ellington Financial LLC EFC is expected to report results on Nov 2. It has an Earnings ESP of +3.33% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

LendingClub Corporation LC is also slated to report results on Nov 7. It has an Earnings ESP of +5.00% and a Zacks Rank #3.

Eaton Vance Corporation EV is expected to release results on Nov 21. Its Earnings ESP is +0.57% and it carries a Zacks Rank of 3.

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LendingClub Corporation (LC) : Free Stock Analysis Report
 
HSBC Holdings PLC (HSBC) : Free Stock Analysis Report
 
Eaton Vance Corporation (EV) : Free Stock Analysis Report
 
Ellington Financial LLC (EFC) : Free Stock Analysis Report
 
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Zacks Investment Research