U.S. Bancorp's Consensus Earnings Per Share Estimates At Risk, Says KBW

In a report published Tuesday, Keefe, Bruyette & Woods analyst Christopher Mutascio wrote that he is "increasingly confident" that U.S. Bancorp's (NYSE: USB) 2015 earnings per share estimate is too high and a revision lower is "likely" in the coming months.

"At a recent conference, management reiterated its previous guidance," Mutascio explained in his note. "But, when implementing specific points of the guidance, we think our consensus-matching 1Q15 earnings per share estimate of $0.76 is at risk of being too high. A 1Q15 miss would make it that much harder to achieve the substantial growth/earnings per share step up implied by the 2Q15 estimate of $0.82 (KBW estimate is $0.78)."

U.S. Bancorp already suggested its first quarter mortgage banking business will be "stable" relative to the fourth quarter at $235 million which is $9 million lower than Mutascio's estimates. In addition, management reminded investors of the seasonality in its payments business and deposit service charges – which decrease on a sequential quarter bases each first quarter.

The analyst added that in the first quarter 2014 the combination of card, processing and deposit services charges dipped by 6.8 percent to $55 million from the fourth quarter 2013. Assuming a similar seasonality, Mutascio noted that his current fee income estimate could be "modestly too high" due to a stable, rather than higher, mortgage banking income.

On the other hand, Mutascio wrote that his net interest income estimate of $2.754 billion is in-line with management's guidance of $2.741 billion.

Finally, Mutascio noted that the largest variance between his estimates and the company's guidance relates to operating expenses. The company expects its first quarter expenses to be stable with the core fourth quarter level of $2.804 billion. The analyst noted that this figure includes $148 million in non-core items and when removed, core expenses were $2.656 billion, $32 million higher than Mutascio's estimates of $2.624 billion.

Shares are Underperform rated with a $44 price target.