Earnings season is underway, and that means that companies are letting investors get an updated peek into their books.
According to Morgan Stanley, three stocks face negative catalysts as their companies announce Q3 results.
In a note Friday, analysts at Morgan Stanley identified stocks with a high likelihood of moving dramatically on good or bad news.
“Our analysts believe that one or more imminent events will drive the share price materially over the next 15-60 days,” said the note. “For each of these stocks, our analyst has high conviction in a view that diverges from the Street’s, and expects a near-term event to drive the stock as the market’s view moves closer to ours.”
The analysts identified 9 stocks facing positive catalysts and 3 with negative ones Below we’ve put together the latter 3 stocks along with the analysts’ best, base and worst case scenario for the stock price.
Sector: Midcap Banks
Current Price: $US14.39
Bull/Base/Bear Projection: $US19/$US15/$US11
Morgan Stanley analyst Ken Zerbe's argument: 'We expect 3Q15 EPS of $US0.21 (a penny below the Street) due largely to our expectations for lower fee income. FHN recently updated guidance for its capital markets business, noting that average daily revenues (ADRs) would be in the low $US700K range in 3Q15, lower than our previous $US800K expectation. Given fee guidance of $US120-125 million, combined with lower ADRs, we believe the Street is overly optimistic with fee income, and this could drive an EPS miss in the quarter. We believe lower expenses could offset some of the lower fees. We assume lower capital markets ADR will also drive lower associated expenses (incentive comp, etc.). We expect a $US5 mil Q/Q decline in operating expenses, to $US213 mil.'
Sector: Midcap Banks
Current Price: $US30.03
Bull/Base/Bear Projection: $US36/$US28/$US22
Morgan Stanley analyst Ken Zerbe's argument: 'We're $US0.02 below consensus for 3Q15 earnings (MSe = $US0.40), with the shortfall driven by several smaller items. First, we expect SNV to post slightly lower net interest income, primarily on weaker earning asset growth (up just 0.3% Q/Q) as cash and security balances decline (following a large increase in 2Q), and 1.3% loan growth. This is consistent with management's goal of deploying liquidity into loans and its 'mid-single digits' loan growth target for 2015. Second, we are $US1 mil lower on fee income, although the impact on EPS is modest. Third, we expect expenses to run $US2 mil higher than consensus at $US176 mil (down $US2 mil Q/Q). We expect lower Q/Q restructuring costs (of $US6 mil), but core expenses are likely to increase ($US170 mil) -- consistent with full-year core expense guidance of $US675 mil.