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It’s time for full-fledged releases of quarterly earnings. Big banks will start reporting from next week. Let’s dig deeper into the likely earnings picture of the big six banking companies that could drive the performance of the sector ahead. For the Finance sector, total Q1 earnings are expected to be up 3.7% on 2.4% higher revenues. This would follow the sector’s 12.4% earnings growth on 8.4% higher revenues in 2023 Q4, per the Earnings Trends issued on Apr 3, 2024.

According to our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), when combined with a positive Earnings ESP, increases our chances of predicting an earnings beat, while a Zacks Rank #4 or 5 (Sell rated) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Inside Our Surprise Prediction

Among the big six, Citigroup Inc. C is likely to report on Apr 12. At the time of writing, Citi has a Zacks Rank #3 and an Earnings ESP of -24.27%. This lowers the predictive power of ESP because a favorable Zacks Rank when combined with a negative ESP makes surprise prediction difficult.

Zacks Rank #3 JPMorgan Chase & Co. JPM is likely to report on Apr 12. It has an Earnings ESP of -0.21%. The stock hails from a top-ranked Zacks Industry (top 37%).

On Apr 12, Wells Fargo & Company WFC, with a Zacks Rank #3 and an ESP of negative 1.10%, will report earnings results. The combination doesn’t make WFC a good candidate for an earnings beat.

Bank of America Corporation BAC is expected to report on Apr 16. The stock has a Zacks Rank #3 and an ESP of -1.74%. Needless to say, here, too, surprise prediction is tough.

On Apr 15, Goldman Sachs Group Inc. GS is likely to come up with its earnings release. Goldman has a Zacks Rank #3 and an ESP of +2.24%. When you combine this positive Earnings ESP with the stock's Zacks Rank #3, it shows that a beat is possibly around the corner.

On Apr 16, Morgan Stanley MS is likely to come up with its earnings. Morgan Stanley has a Zacks Rank #3 and an ESP of -0.25%. The stock also comes from a top-ranked Zacks industry (top 16%).

What Does ESP Tell About Bank ETFs?

As discussed above, the chances of a broad-based earnings beat are moderate. But then, the first quarter of 2024 has seen a steepening of the yield curve, which is positive for bank stocks. The U.S. economy has been showing strong resilience. The Fed is likely to cut rates this year. This should bode well for bank ETFs as chances of higher long-term rates and lower short-term rates would broaden banks’ net interest rate margins.

Financial ETFs like iShares U.S. Financial Services ETF IYG, iShares US Financials ETF IYF, Invesco KBW Bank ETF KBWB, Financial Select Sector SPDR XLF and Vanguard Financials ETF VFH are performing well before the earnings releases. These funds have considerable exposure to the aforementioned stocks. Funds like IYG, IYF, KBWB, XLF and VFH are up 9.6%, 10.4%, 5.8%, 10.3% and 9.4%, respectively, this year (as of Apr 4, 2024).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.