U.S. Bancorp’s Earnings Preview: Will U.S. Bancorp Beat FY19 Earnings Expectations?

by Trefis Team
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U.S. Bancorp
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U.S. Bancorp (NYSE: USB) is slated to release its Q4 and full-year 2019 results on Wednesday, January 15. Trefis details earnings expectations for the bank in an interactive dashboard, parts of which are highlighted below. We believe that U.S. Bancorp will report revenues and earnings for FY 2019 which are largely in line with expectations. While the bank’s revenues would have increased slightly year-on-year to $22.9 billion thanks to growth in consumer banking and card & payment services, our estimate is marginally lower than the consensus estimate of $23.0 billion. However our EPS estimate for FY19 of $4.34 is marginally higher than the consensus estimate of $4.33. Since the expected results are very close to the consensus estimate for FY 2019, we believe that it would not result in any significant movement in the U.S Bancorp’s stock price once earnings are announced. In fact, our forecast indicates that U.S. Bancorp’s valuation is $57 a share, which is roughly at the same level as its current price

(1) U.S Bancorp’s revenues would increase 1.9% to $22.9 billion in 2019; slightly below consensus estimates

  • Trefis estimates U.S. Bancorp’s 2019 revenues to be $22.9 billion, slightly below the consensus estimate of $23.0 billion.
  • Total revenues have increased at an average annual rate of 3% over the last two years, from $21.1 billion in 2016 to $22.5 billion in 2018, and the trend is expected to continue in the near term.
  • Increase in Card & Payment Services and Consumer Banking revenues likely to add $400 million to the line for 2019, taking the bank’s revenues past $22.9 billion.
  • The growth in consumer banking would mainly be driven by higher net interest income due to slight improvement in net interest yield and higher average outstanding consumer loans.
  • On the other hand, growth in card & payment services would be driven by an increase in Average Credit Card Loans and higher Credit Card Transaction Volume.
  • Notably, we expect U.S Bancorp’s revenues to cross $23.3 billion in 2020.

Our interactive dashboard analysis, How Does U.S. Bancorp Make Money?, provides an in-depth view of the company’s revenues along with our forecasts and a comparison of trends with peers Citigroup, Wells Fargo and Capital One.

 

(2) EPS is expected to increase 4.7% from $4.14 in 2018 to $4.34 in 2019, which would marginally beat consensus estimates

  • U.S. Bancorp’s 2019 earnings per share (EPS) is expected to be $4.34 per Trefis analysis, marginally higher than the consensus estimate of $4.33 per share
  • An increase in revenues as detailed above coupled with a reduction in Shares Outstanding will drive EPS growth despite an expected increase in Total Expenses by 2.2%.
  • As we forecast U.S Bancorp’s Revenues to grow at a slower rate than Expenses in 2019 (1.9% vs. 2.2%), this will result in a slight decrease in U.S Bancorp’s Net Income Margin figure from 30.1% in 2018 to 29.9% in 2019.
  • For 2020, we believe that despite an increase in revenues, slightly higher growth in expenses will result in the net income margin figure shrinking further to 29.1%

(3) Stock price estimate is almost same as the market price

  • A trailing P/E multiple of 13.1x looks appropriate for U.S Bancorp’s stock, which is same as the current implied P/E multiple of 13.1x
  • Trefis’ forecast for U.S. Bancorp’s 2019 earnings, as well as P/E multiple are in line with market expectations, because of which our $57 price estimate for U.S. Bancorp’s stock is around the current market price.

Additionally, you can input your estimates for U.S. Bancorp’s key metrics in our interactive dashboard for U.S. Bancorp’s pre-earnings, and see how that will affect the company’s stock price.

 

See all Trefis Price Estimates and Download Trefis Data here

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