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Commerce Bancshares (CBSH) Up 4% Since Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Commerce Bancshares, Inc. (CBSH - Free Report) . Shares have added nearly 4% in the past month, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Commerce Bancshares Q1 Earnings Beat, Costs Rise
Commerce Bancshares’ first-quarter 2017 earnings of $0.68 per share surpassed the Zacks Consensus Estimate of $0.65. Moreover, the figure reflects a 9.7% rise from the year-ago quarter.
Better-than-expected results were primarily driven by an increase in total revenue based on higher net interest income. The company witnessed growth in loans but deposits were relatively low. Rising expenses and an increase in provisions were the undermining factors.
Net income available to the common shareholders in the reported quarter was $69.3 million, up 9.7% year over year.
Revenues Improve but Costs Escalate
Total revenue for the quarter was $295.3 million, an increase of 4.4% year over year. However, the figure marginally lagged the Zacks Consensus Estimate of $296 million.
Quarterly net interest income increased 8.9% year over year to $178.3 million.
Non-interest income was $117.1 million, down 1.6% year over year. The decrease was mainly due to lower profits on branch property sales along with lower bank card and swap fee income.
Non-interest expenses rose 5.3% year over year to $186.8 million triggered by a rise in salaries and employee benefits costs, bank card expense and professional fees. However, the rise was partly offset by lower supplies, communication and marketing costs. Non-interest expenses included a contribution expense of $2.3 million related to the donation of appreciated securities.
Efficiency ratio for the quarter increased to 63.14% from 62.62% in the prior-year quarter. A rise in efficiency ratio indicates lower profitability.
Strong Balance Sheet
As of Mar 31, 2017, total loans were $13.57 billion, up 1.2% sequentially. Total deposits, as of the same date, were $21.09 billion, down marginally from the prior month.
However, total stockholder’s equity was $2.56 billion as of Mar 31, 2017, an increase of 2.5% from the previous month.
Credit Quality: A Mixed Bag
Allowance for loan losses, as a percent of total loans, came in at 1.16%, down 4 basis points (bps) year over year. Net loan charge-offs to average loans ratio (annualized) remained stable year over year at 0.28%.
However, provision for loan losses increased 17.9% year over year to $11.1 million.
Improving Profitability & Strong Capital Position
As of Mar 31, 2017, Tier I leverage ratio was 9.56%, up 45 bps year over year. Moreover, tangible common equity to tangible assets ratio grew 19 bps year over year to 9.03%.
Further, the company’s return on average assets improved 8 bps year over year to 1.15%, and return on average common equity increased 54 bps year over year to 11.74%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been five revisions higher for the current quarter compared to one lower.
At this time, Commerce Bancshares' stock has a nice Growth Score of 'B', however its Momentum is lagging a bit with a 'C'. Charting a same path, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stocks has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is more suitable for growth than momentum and value based on our styles scores.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Commerce Bancshares (CBSH) Up 4% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Commerce Bancshares, Inc. (CBSH - Free Report) . Shares have added nearly 4% in the past month, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Commerce Bancshares Q1 Earnings Beat, Costs Rise
Commerce Bancshares’ first-quarter 2017 earnings of $0.68 per share surpassed the Zacks Consensus Estimate of $0.65. Moreover, the figure reflects a 9.7% rise from the year-ago quarter.
Better-than-expected results were primarily driven by an increase in total revenue based on higher net interest income. The company witnessed growth in loans but deposits were relatively low. Rising expenses and an increase in provisions were the undermining factors.
Net income available to the common shareholders in the reported quarter was $69.3 million, up 9.7% year over year.
Revenues Improve but Costs Escalate
Total revenue for the quarter was $295.3 million, an increase of 4.4% year over year. However, the figure marginally lagged the Zacks Consensus Estimate of $296 million.
Quarterly net interest income increased 8.9% year over year to $178.3 million.
Non-interest income was $117.1 million, down 1.6% year over year. The decrease was mainly due to lower profits on branch property sales along with lower bank card and swap fee income.
Non-interest expenses rose 5.3% year over year to $186.8 million triggered by a rise in salaries and employee benefits costs, bank card expense and professional fees. However, the rise was partly offset by lower supplies, communication and marketing costs. Non-interest expenses included a contribution expense of $2.3 million related to the donation of appreciated securities.
Efficiency ratio for the quarter increased to 63.14% from 62.62% in the prior-year quarter. A rise in efficiency ratio indicates lower profitability.
Strong Balance Sheet
As of Mar 31, 2017, total loans were $13.57 billion, up 1.2% sequentially. Total deposits, as of the same date, were $21.09 billion, down marginally from the prior month.
However, total stockholder’s equity was $2.56 billion as of Mar 31, 2017, an increase of 2.5% from the previous month.
Credit Quality: A Mixed Bag
Allowance for loan losses, as a percent of total loans, came in at 1.16%, down 4 basis points (bps) year over year. Net loan charge-offs to average loans ratio (annualized) remained stable year over year at 0.28%.
However, provision for loan losses increased 17.9% year over year to $11.1 million.
Improving Profitability & Strong Capital Position
As of Mar 31, 2017, Tier I leverage ratio was 9.56%, up 45 bps year over year. Moreover, tangible common equity to tangible assets ratio grew 19 bps year over year to 9.03%.
Further, the company’s return on average assets improved 8 bps year over year to 1.15%, and return on average common equity increased 54 bps year over year to 11.74%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been five revisions higher for the current quarter compared to one lower.
Commerce Bancshares, Inc. Price and Consensus
Commerce Bancshares, Inc. Price and Consensus | Commerce Bancshares, Inc. Quote
VGM Scores
At this time, Commerce Bancshares' stock has a nice Growth Score of 'B', however its Momentum is lagging a bit with a 'C'. Charting a same path, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stocks has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is more suitable for growth than momentum and value based on our styles scores.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.