BMO Earnings Preview: Here’s What to Watch for

Bank of Montreal (BMO), the fourth largest bank in Canada, will kick off Big Banks Q2 earnings reporting on May 26. Over the past year, the bank stock has jumped more than 80% and is currently trading close to C$125.00. Strong earnings could drive BMO stock price higher, so let’s have a look at what analysts are expecting.

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Analysts on average expect BMO to report adjusted earnings of C$2.77 per share in Q2 2021, which would represent a growth of 166% from the prior-year quarter (C$1.04 per share). The estimated revenue is C$6.12 billion, indicating an increase of 1.6% from the second quarter of 2020.

BMO reported adjusted earnings of C$3.06 per share in the previous quarter, increasing 27% compared to Q1 2020 (C$2.41 per share). The result also beat the consensus estimate of C$2.15. Higher revenues in the company’s U.S. operations and lower provisions and expenses boosted results.

BMO beat EPS estimates in the past three quarters and have very good chances to beat estimates again in the second quarter.

Points to watch

Equity markets experienced increased volatility and higher activity during the latest quarter, driven by continued uncertainty over economic growth. In addition, inflation concerns did not dampen strong fixed-income markets. Therefore, revenues from its equity and fixed income markets are anticipated to improve in Q2.

Meanwhile, BMO boosted its reserves during the deteriorating macroeconomic environment in fiscal 2020. It is therefore unlikely that the bank will need to increase the provision for loan losses in Q2. Also, BMO’s advisory fees are likely to experience an uplift due to higher global M&A volumes. (See Bank of Montreal stock analysis on TipRanks)

A few days ago, Scotiabank analyst Meny Grauman maintained a Buy rating on BMO while raising its price target to $137.00 (from $126.00), for 9.5% upside potential.

Grauman raised her price target on BMO as the outlook for Canadian banks is excellent due to a strong post-pandemic economic recovery. Thus, BMO and other “Canadian banks can trade well above historical forward multiples.”

The rest of the Street is cautiously optimistic about BMO with a Moderate Buy consensus rating based on 7 Buys, 2 Holds, and 1 Sell. The average analyst price target of C$126.44 implies 1% upside potential to current levels.

TipRanks’ Smart Score

BMO scores a 9 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform the overall market.