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Why Is Bank OZK (OZK) Up 18.6% Since Last Earnings Report?
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A month has gone by since the last earnings report for Bank OZK (OZK - Free Report) . Shares have added about 18.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Bank OZK due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Bank OZK Q4 Earnings Beat Estimates as Revenues Rise
Bank OZK’s fourth-quarter 2020 earnings per share of 93 cents surpassed the Zacks Consensus Estimate of 80 cents. Moreover, the bottom line jumped 19.2% on year-over-year basis.
Results were aided by an improvement in net interest income and lower expenses. However, decline in non-interest income and higher provision for credit losses acted as headwinds.
Net income available to common shareholders was $120.5 million, up 19.5% from the year-ago quarter.
In 2020, earnings of $2.26 per share beat the consensus estimate of $2.12 but fell 31.5% from the prior year. Net income available to common shareholders declined 31.5% to $291.9 million.
Revenues Improve, Expenses Fall
Net revenues in the reported quarter were $266.3 million, up 8.5% year over year. Also, the top line outpaced the Zacks Consensus Estimate of $250 million.
In 2020, net revenues rose marginally to $993.2 million. Also, it beat the consensus estimate of $977.6 million.
Net interest income was $237.6 million, up 10.5% year over year. Net interest margin, on a fully-taxable equivalent basis, declined 27 basis points (bps) to 3.88%.
Non-interest income was $28.7 million, down 5.7%. The fall was primarily due to decrease in all fee income components except gain on sale of other assets.
Non-interest expenses were $103.4 million, down 1%. The decline was largely due to lower other operating expenses.
Bank OZK’s efficiency ratio was 38.61%, down from 42.37% in the prior-year quarter. A fall in efficiency ratio indicates improvement in profitability.
As of Dec 31, 2020, total loans were $19.2 billion, up from $17.5 billion recorded as of Dec 31, 2019. As of the same date, total deposits amounted to $21.5 billion, up from $18.5 billion.
Credit Quality Worsens
The ratio of non-performing loans, as a percentage of total loans, rose 10 bps year over year to 0.25% as of Dec 31, 2020. Moreover, provision for credit losses increased 36.7% to $6.8 million.
Annualized net charge off ratio to average total loans increased 2 bps 0.14%.
Profitability Ratios Improve
At the end of the fourth quarter, return on average assets was 1.79%, up from 1.74% in the year-earlier quarter. Return on average common equity was 11.36%, up from 9.73%.
Outlook
The company expects Real Estate Specialties Group (“RESG”) loans to be the largest contributor to total loan growth during 2021.
RESG loan repayments in 2021 are expected to be higher than that reported in 2019.
The company expects cost of interest-bearing deposits (COIBD) to decrease in 2021.
It expects gains of $4-$5 million from the sale of the two branches in South Carolina.
Management expects purchased loan runoff to prevail and be a headwind to overall loan growth in 2021.
The effective tax rate is expected to be 23-24% in 2021.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 17.25% due to these changes.
VGM Scores
At this time, Bank OZK has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Bank OZK has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Bank OZK (OZK) Up 18.6% Since Last Earnings Report?
A month has gone by since the last earnings report for Bank OZK (OZK - Free Report) . Shares have added about 18.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Bank OZK due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Bank OZK Q4 Earnings Beat Estimates as Revenues Rise
Bank OZK’s fourth-quarter 2020 earnings per share of 93 cents surpassed the Zacks Consensus Estimate of 80 cents. Moreover, the bottom line jumped 19.2% on year-over-year basis.
Results were aided by an improvement in net interest income and lower expenses. However, decline in non-interest income and higher provision for credit losses acted as headwinds.
Net income available to common shareholders was $120.5 million, up 19.5% from the year-ago quarter.
In 2020, earnings of $2.26 per share beat the consensus estimate of $2.12 but fell 31.5% from the prior year. Net income available to common shareholders declined 31.5% to $291.9 million.
Revenues Improve, Expenses Fall
Net revenues in the reported quarter were $266.3 million, up 8.5% year over year. Also, the top line outpaced the Zacks Consensus Estimate of $250 million.
In 2020, net revenues rose marginally to $993.2 million. Also, it beat the consensus estimate of $977.6 million.
Net interest income was $237.6 million, up 10.5% year over year. Net interest margin, on a fully-taxable equivalent basis, declined 27 basis points (bps) to 3.88%.
Non-interest income was $28.7 million, down 5.7%. The fall was primarily due to decrease in all fee income components except gain on sale of other assets.
Non-interest expenses were $103.4 million, down 1%. The decline was largely due to lower other operating expenses.
Bank OZK’s efficiency ratio was 38.61%, down from 42.37% in the prior-year quarter. A fall in efficiency ratio indicates improvement in profitability.
As of Dec 31, 2020, total loans were $19.2 billion, up from $17.5 billion recorded as of Dec 31, 2019. As of the same date, total deposits amounted to $21.5 billion, up from $18.5 billion.
Credit Quality Worsens
The ratio of non-performing loans, as a percentage of total loans, rose 10 bps year over year to 0.25% as of Dec 31, 2020. Moreover, provision for credit losses increased 36.7% to $6.8 million.
Annualized net charge off ratio to average total loans increased 2 bps 0.14%.
Profitability Ratios Improve
At the end of the fourth quarter, return on average assets was 1.79%, up from 1.74% in the year-earlier quarter. Return on average common equity was 11.36%, up from 9.73%.
Outlook
The company expects Real Estate Specialties Group (“RESG”) loans to be the largest contributor to total loan growth during 2021.
RESG loan repayments in 2021 are expected to be higher than that reported in 2019.
The company expects cost of interest-bearing deposits (COIBD) to decrease in 2021.
It expects gains of $4-$5 million from the sale of the two branches in South Carolina.
Management expects purchased loan runoff to prevail and be a headwind to overall loan growth in 2021.
The effective tax rate is expected to be 23-24% in 2021.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 17.25% due to these changes.
VGM Scores
At this time, Bank OZK has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Bank OZK has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.