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Comerica Incorporated (CMA) Down 12% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Comerica Incorporated (CMA - Free Report) . Shares have lost about 12% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Comerica Incorporated due for a breakout? 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.
Comerica Q1 Earnings & Revenues Miss, Fee Income Falls
Comerica’s first-quarter earnings per share of $1.37 missed the Zacks Consensus Estimate of $1.38. Further, the bottom line came in lower than the prior-year quarter figure of $2.43.
Comerica’s results were affected by a decline in revenues due to lower fee income. Higher expenses and a decline in deposits balance were other negatives. Nonetheless, decent NII and credit quality were tailwinds.
Net income attributable to common shares came in at $182 million in the quarter, plunging 47% year over year from $343 million.
Segment-wise, on a year-over-year basis, net income plunged 45.6% and 51.4% at Commercial Bank and Wealth Management, respectively. The Retail segment reported a net loss against a net income of $6 million in the prior-year quarter. The Finance segment reported a loss of $34 compared to $80 in the year-ago reported loss.
Revenues Fall, Expenses Increase
Comerica’s first-quarter total revenues were $700 million, down 1.8% year over year. Further, the top line lagged the consensus estimate of $721.5 million.
NII increased 3% on a year-over-year basis to $456 million in the quarter on higher interest-earning assets. The NIM contracted 10 basis points (bps) to 2.19%.
Total non-interest income was $244 million, down 10% on a year-over-year basis. Lower card fees, derivative income, letter of credit fees and other non-interest income mainly dragged the fee income.
Non-interest expenses totaled $473 million, up 6% year over year. The upswing resulted chiefly from higher salaries and benefit expenses, advertising expenses and other non-interest expenses.
The efficiency ratio was 66.91% compared with the prior-year quarter’s 62.59%. A rise in the ratio indicates lower profitability.
Decent Balance-Sheet Position
As of Mar 31, 2022, total assets and common shareholders' equity were $89.2 billion and $7 billion, respectively, compared with $86.3 billion and $8.2 billion each, as of Mar 31, 2021.
Total loans increased marginally on a sequential basis to $49.6 billion. However, total deposits declined 5.8% from the prior quarter’s level to $77.6 billion.
Decent Credit Quality
Total non-performing assets decreased 15.7% year over year to $274 million. The allowance for credit losses was $599 million, down from $807 million in the prior-year quarter. The allowance for loan losses to total loans ratio was 1.21% as of Mar 31, 2022, down from 1.59% as of Mar 31, 2021.
However, net credit-related charge-offs were $8 million compared with $3 million in the prior-year quarter. A benefit to provision for credit losses of $11 million was recorded in the reported quarter, substantially down from $182 million of benefit recorded in the prior-year quarter.
Weak Capital Position
As of Mar 31, 2022, Comerica’s tangible common equity ratio was 6.77%, down from 8.30% in the prior-year quarter. The total capital ratio was 12.04%, declining from 13.86% in the year-ago quarter.
Common Equity Tier 1 (CET1) capital ratio was 9.93%, falling from 11.02% in the prior-year quarter.
Solid Capital-Deployment Activities
In the reported quarter, Comerica returned $124 million to its shareholders through share repurchases and dividends. Comerica’s repurchased $35 million of common stock under its share repurchase program and declared dividends of $89 million on its common stock.
Outlook
Second-Quarter 2022
Assuming interest-rate increase of 25 bps and 50 bps respectively in March and May, NII (including PPP) is expected to grow more than 15% relative to first-quarter 2022.
2022
Comerica provided the guidance for 2022 on expectations of continued economic growth.
Average loans (excluding PPP) are expected to grow in the mid-single-digit range. It will be unfavorably impacted by declines in Mortgage Banker and National Dealer Services. Including PPP loans, the metric is expected to remain stable. Also, an increase of 1-2% every quarter is expected from first-quarter 2022, backed by growth across most businesses.
Average deposits are expected to remain stable. A modest decline in the remainder of the year is expected relative to first-quarter 2022.
Assuming interest-rate increases of 25 bps and 50 bps, respectively, in March and May, NII (including PPP) is expected to grow more than 13% year over year. Management expects further scope for growth from hedging activities and rate increases.
Non-interest income is likely to be supported by customer-driven fee categories. However, these could be more than offset by lower cards, derivatives, warrants and deferred comps.
Non-interest expenses are estimated to rise in the low-single-digit range due to increased technology investments and insurance.
The company expects net charge-offs at the lower end of its normal range, while non-accruals and criticized loans might remain low.
CET1 is targeted to be 10%.
The tax rate for 2022 is anticipated to be 22-23%, excluding discrete items.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, Comerica Incorporated has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Comerica Incorporated has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Comerica Incorporated (CMA) Down 12% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Comerica Incorporated (CMA - Free Report) . Shares have lost about 12% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Comerica Incorporated due for a breakout? 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.
Comerica Q1 Earnings & Revenues Miss, Fee Income Falls
Comerica’s first-quarter earnings per share of $1.37 missed the Zacks Consensus Estimate of $1.38. Further, the bottom line came in lower than the prior-year quarter figure of $2.43.
Comerica’s results were affected by a decline in revenues due to lower fee income. Higher expenses and a decline in deposits balance were other negatives. Nonetheless, decent NII and credit quality were tailwinds.
Net income attributable to common shares came in at $182 million in the quarter, plunging 47% year over year from $343 million.
Segment-wise, on a year-over-year basis, net income plunged 45.6% and 51.4% at Commercial Bank and Wealth Management, respectively. The Retail segment reported a net loss against a net income of $6 million in the prior-year quarter. The Finance segment reported a loss of $34 compared to $80 in the year-ago reported loss.
Revenues Fall, Expenses Increase
Comerica’s first-quarter total revenues were $700 million, down 1.8% year over year. Further, the top line lagged the consensus estimate of $721.5 million.
NII increased 3% on a year-over-year basis to $456 million in the quarter on higher interest-earning assets. The NIM contracted 10 basis points (bps) to 2.19%.
Total non-interest income was $244 million, down 10% on a year-over-year basis. Lower card fees, derivative income, letter of credit fees and other non-interest income mainly dragged the fee income.
Non-interest expenses totaled $473 million, up 6% year over year. The upswing resulted chiefly from higher salaries and benefit expenses, advertising expenses and other non-interest expenses.
The efficiency ratio was 66.91% compared with the prior-year quarter’s 62.59%. A rise in the ratio indicates lower profitability.
Decent Balance-Sheet Position
As of Mar 31, 2022, total assets and common shareholders' equity were $89.2 billion and $7 billion, respectively, compared with $86.3 billion and $8.2 billion each, as of Mar 31, 2021.
Total loans increased marginally on a sequential basis to $49.6 billion. However, total deposits declined 5.8% from the prior quarter’s level to $77.6 billion.
Decent Credit Quality
Total non-performing assets decreased 15.7% year over year to $274 million. The allowance for credit losses was $599 million, down from $807 million in the prior-year quarter. The allowance for loan losses to total loans ratio was 1.21% as of Mar 31, 2022, down from 1.59% as of Mar 31, 2021.
However, net credit-related charge-offs were $8 million compared with $3 million in the prior-year quarter. A benefit to provision for credit losses of $11 million was recorded in the reported quarter, substantially down from $182 million of benefit recorded in the prior-year quarter.
Weak Capital Position
As of Mar 31, 2022, Comerica’s tangible common equity ratio was 6.77%, down from 8.30% in the prior-year quarter. The total capital ratio was 12.04%, declining from 13.86% in the year-ago quarter.
Common Equity Tier 1 (CET1) capital ratio was 9.93%, falling from 11.02% in the prior-year quarter.
Solid Capital-Deployment Activities
In the reported quarter, Comerica returned $124 million to its shareholders through share repurchases and dividends. Comerica’s repurchased $35 million of common stock under its share repurchase program and declared dividends of $89 million on its common stock.
Outlook
Second-Quarter 2022
Assuming interest-rate increase of 25 bps and 50 bps respectively in March and May, NII (including PPP) is expected to grow more than 15% relative to first-quarter 2022.
2022
Comerica provided the guidance for 2022 on expectations of continued economic growth.
Average loans (excluding PPP) are expected to grow in the mid-single-digit range. It will be unfavorably impacted by declines in Mortgage Banker and National Dealer Services. Including PPP loans, the metric is expected to remain stable. Also, an increase of 1-2% every quarter is expected from first-quarter 2022, backed by growth across most businesses.
Average deposits are expected to remain stable. A modest decline in the remainder of the year is expected relative to first-quarter 2022.
Assuming interest-rate increases of 25 bps and 50 bps, respectively, in March and May, NII (including PPP) is expected to grow more than 13% year over year. Management expects further scope for growth from hedging activities and rate increases.
Non-interest income is likely to be supported by customer-driven fee categories. However, these could be more than offset by lower cards, derivatives, warrants and deferred comps.
Non-interest expenses are estimated to rise in the low-single-digit range due to increased technology investments and insurance.
The company expects net charge-offs at the lower end of its normal range, while non-accruals and criticized loans might remain low.
CET1 is targeted to be 10%.
The tax rate for 2022 is anticipated to be 22-23%, excluding discrete items.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, Comerica Incorporated has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Comerica Incorporated has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.