- Reuters/David Mdzinarishvili
Earnings season is underway, and that means companies are letting investors get an updated peek into their books.
According to Morgan Stanley, three stocks face negative catalysts as their companies announce third-quarter 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,” the note said. “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 nine stocks facing positive catalysts and three with negative ones. Below we’ve listed the latter three stocks along with the analysts’ best-, base-, and worst-case scenario for the stock price.
First Horizon National
- First Tennessee Bank/YouTube
Sector: Midcap Banks
Current Price: $14.39
Bull/Base/Bear Projection: $19/$15/$11
Morgan Stanley analyst Ken Zerbe’s argument: “We expect 3Q15 EPS of $0.21 (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 $700K range in 3Q15, lower than our previous $800K expectation. Given fee guidance of $120-125 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 $5 mil Q/Q decline in operating expenses, to $213 mil.”
- REUTERS/Toru Hanai
Current Price: $10.28
Bull/Base/Bear Projection: $13.50/$10.50/$7.50
Morgan Stanley analyst Craig Hettenbach’s argument: “We see risks to Q4 estimates across the Semiconductor group, but stress the risk is greater for companies that have been less aggressive in resetting expectations. ON guided Q3 sales 3% below the Street, compared to peer Fairchild 11% below and the median Semi company 5% below. Our estimates are below the Street for Q3. More so, we expect weakness at ON to spillover into Q4, leading to a bigger shortfall to our and Street estimates relative to peers.”
Sector: Midcap Banks
Current Price: $30.03
Bull/Base/Bear Projection: $36/$28/$22
Morgan Stanley analyst Ken Zerbe’s argument: “We’re $0.02 below consensus for 3Q15 earnings (MSe = $0.40), 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 $1 mil lower on fee income, although the impact on EPS is modest. Third, we expect expenses to run $2 mil higher than consensus at $176 mil (down $2 mil Q/Q). We expect lower Q/Q restructuring costs (of $6 mil), but core expenses are likely to increase ($170 mil)- consistent with full-year core expense guidance of $675 mil.