Market Overview

M&T Bank Earnings Preview: Strong EPS Growth Expected

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M&T Bank (NYSE: MTB), which is facing concerns of the Federal Reserve over its intended acquisition of Hudson City Bancorp (NASDAQ: HCBK), is scheduled to report its first-quarter 2013 results Monday, April 15, before the markets open.

Investors will be hoping for a repeat of the fourth quarter, when net income more than doubled year-over-year, boosted in part by an increase in mortgage banking revenues and a decrease in loan-loss provisions.

Expectations

Analysts on average predict that M&T Bank will report that revenue for the quarter rose more than 11 percent year-over-year to $1.11 billion. Earnings of $1.96 per share are also in the consensus forecast. That would be up from a reported profit of $1.50 per share in the comparable period of last year.

But note that the consensus earnings per share (EPS) estimate has ticked down in the past 60 days from $1.97. And M&T Bank has fallen short of consensus EPS estimates in half of the past six quarters. The earnings miss back in the fourth quarter was by about two cents per share.

The CFO said in the fourth-quarter release: "This was a year of tremendous accomplishment, in which M&T recorded record levels of net income and earnings per share. Revenues were up in most major categories, led by exceptional growth in mortgage banking." The share price climbed about two percent in the days following the fourth-quarter report.

Looking ahead to the current quarter, the forecast thus far calls for EPS up about 16 percent year-over-year to $2.04. But that EPS estimate is a penny less than it was 60 days ago. And revenue for the quarter is expected to be about 16 percent higher to $1.21 billion. Full-year revenue is so far expected to be up by a double-digit percentage as well.

The Company

M&T Bank provides commercial and retail banking services to individuals, corporations and other businesses and institutions. It operates more than 720 branches and about 2,000 ATMs primarily in the Mid-Atlantic states.

The company was founded in 1856, and its headquarters are in Buffalo, New York. M&T Bank is a component of the S&P 500, and it now has a market capitalization of almost $13 billion. Robert G. Wilmers has been chairman and chief executive officer of the company since December 2006.

Competitors include KeyCorp (NYSE: KEY) and PNC Financial Services (NYSE: PNC). For the former, EPS and revenue are expected to be about the same as a year ago. For the latter, growth of less than 10 percent is forecast for both the top and bottom lines. KeyCorp and PNC are both scheduled to share their results for the most recent quarter this week.

During the three months that ended in March, M&T Bank launched a new online payroll processing service for small business customers, announced management changes in anticipation of the merger with Hudson City and announced its dividend rate would remain unchanged following the Fed's stress test.

Performance

M&T Bank has a long-term EPS growth forecast of about 11 percent, and its price-to-earnings (P/E) ratio is lower than the industry average. The operating margin is greater than the industry average, but the return on equity is less than 11 percent. The current dividend yield is about 2.8 percent.

The number of M&T Bank shares sold short, as of the March 28 settlement date, represents more than eight percent of the float. That is the highest level of short interest in at least a year. Days to cover is about 15.

The consensus recommendation of analysts surveyed by Thomson/First Call who follow the stock is to hold shares, and it has been for at least three months. The analysts' mean price target, or where they expect the stock to go, is more than eight percent higher than the current share price. That would be a level the stock has not seen since 2007.

The share price pulled back more than four percent Friday on news of the Fed's concerns about the Hudson City merger. That wiped out the year-to-date gain. The share price fell below the 50-day moving average again Friday. Over the past six months, the stock has underperformed KeyCorp and the broader markets.

Posted-In: hudson city bancorp keycorp M&T bankEarnings Long Ideas Short Ideas Previews Trading Ideas Best of Benzinga

 

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