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Why Is Zions (ZION) Up 3.8% Since Last Earnings Report?
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A month has gone by since the last earnings report for Zions (ZION - Free Report) . Shares have added about 3.8% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to its next earnings release, or is Zions 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 catalysts.
Zions' Q2 Earnings & Revenues Lag Estimates, Costs Rise
Zions’ second-quarter 2018 earnings of 89 cents per share lagged the Zacks Consensus Estimate of 92 cents. However, the figure compares favorably with the prior-year quarter’s earnings of 73 cents.
Results, to a great extent, benefited from improvement in both net interest income and non-interest income. Also, the quarter witnessed a strong balance sheet position. However, higher adjusted non-interest expenses and a rise in provisions were the headwinds.
Net income attributable to common shareholders was $187 million, indicating an increase of 21% year over year.
Revenues Improve, Costs Rise
Net revenues were $686 million, increasing 4% year over year. However, the top line missed the Zacks Consensus Estimate of $687.3 million.
Net interest income was $548 million, up 4% from the prior-year quarter. The rise was primarily attributable to increase in interest and fees on loans, partially offset by higher interest expenses. Further, net interest margin rose 4 basis points (bps) year over year to 3.56%.
Non-interest income amounted to $138 million, growing 5% from the year-ago quarter. The increase primarily stemmed from higher customer-related fees, and dividends and other investment income.
Adjusted non-interest expenses were up 5% year over year to $420 million. Higher provision for unfunded lending commitments and advertising costs mainly led to the increase.
Efficiency ratio was 60.9%, up from 59.8% reported a year ago. Rise in efficiency ratio indicates deterioration in profitability.
Strong Balance Sheet
As of Jun 30, 2018, total net loans were $44.7 billion, relatively stable from the end of the prior quarter. Total deposits increased 1.2% from the prior-quarter end to $53.6 billion.
Credit Quality: A Mixed Bag
The ratio of non-performing assets to loans and leases, as well as other real estate owned, decreased 35 bps year over year to 0.77%. Moreover, net loan and lease recoveries were $12 million against charge-offs of $7 million in the prior-year quarter.
However, provisions for credit losses were $12 million, up 20% year over year.
Capital Ratios Deteriorate, Profitability Ratios Improve
Tier 1 leverage ratio was 10.5% as of Jun 30, 2018, on par with the prior-year quarter level. Tier 1 risk-based capital ratio was 13.3%, down from 13.4% in the year-ago quarter.
At the end of the April-June quarter, return on average assets was 1.19%, up from 1.03% as of Jun 30, 2017. Also, as of Jun 30, 2018, tangible return on average tangible common equity was 12.4%, up from 10.2% a year ago.
Share Repurchases
During the reported quarter, Zions repurchased $120 million worth of shares.
Outlook
Management expects pre-provision net revenue growth rate to be in the high single digit.
Net interest income has been forecasted to increase moderately in the next 12 months and customer-related fees to increase slightly.
Loan growth is expected to be at mid-single digit rate. The growth will likely be driven by moderate to strong growth in 1-4 family, municipal, C&I and owner-occupied loans as well as stable to slight increase in Oil &Gas loans, partially offset by moderate decline in national real estate loans.
Adjusted non-interest expenses are expected to increase at low-single digit rate of growth.
Effective tax rate is anticipated to be approximately 23% for 2018.
Loan loss provisions are projected to be in a modest range in the next 12 months.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
Currently, Zions has a poor Growth Score of F, however its Momentum is doing a bit better with a D. However, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable soley for value based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Zions 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 Zions (ZION) Up 3.8% Since Last Earnings Report?
A month has gone by since the last earnings report for Zions (ZION - Free Report) . Shares have added about 3.8% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to its next earnings release, or is Zions 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 catalysts.
Zions' Q2 Earnings & Revenues Lag Estimates, Costs Rise
Zions’ second-quarter 2018 earnings of 89 cents per share lagged the Zacks Consensus Estimate of 92 cents. However, the figure compares favorably with the prior-year quarter’s earnings of 73 cents.
Results, to a great extent, benefited from improvement in both net interest income and non-interest income. Also, the quarter witnessed a strong balance sheet position. However, higher adjusted non-interest expenses and a rise in provisions were the headwinds.
Net income attributable to common shareholders was $187 million, indicating an increase of 21% year over year.
Revenues Improve, Costs Rise
Net revenues were $686 million, increasing 4% year over year. However, the top line missed the Zacks Consensus Estimate of $687.3 million.
Net interest income was $548 million, up 4% from the prior-year quarter. The rise was primarily attributable to increase in interest and fees on loans, partially offset by higher interest expenses. Further, net interest margin rose 4 basis points (bps) year over year to 3.56%.
Non-interest income amounted to $138 million, growing 5% from the year-ago quarter. The increase primarily stemmed from higher customer-related fees, and dividends and other investment income.
Adjusted non-interest expenses were up 5% year over year to $420 million. Higher provision for unfunded lending commitments and advertising costs mainly led to the increase.
Efficiency ratio was 60.9%, up from 59.8% reported a year ago. Rise in efficiency ratio indicates deterioration in profitability.
Strong Balance Sheet
As of Jun 30, 2018, total net loans were $44.7 billion, relatively stable from the end of the prior quarter. Total deposits increased 1.2% from the prior-quarter end to $53.6 billion.
Credit Quality: A Mixed Bag
The ratio of non-performing assets to loans and leases, as well as other real estate owned, decreased 35 bps year over year to 0.77%. Moreover, net loan and lease recoveries were $12 million against charge-offs of $7 million in the prior-year quarter.
However, provisions for credit losses were $12 million, up 20% year over year.
Capital Ratios Deteriorate, Profitability Ratios Improve
Tier 1 leverage ratio was 10.5% as of Jun 30, 2018, on par with the prior-year quarter level. Tier 1 risk-based capital ratio was 13.3%, down from 13.4% in the year-ago quarter.
At the end of the April-June quarter, return on average assets was 1.19%, up from 1.03% as of Jun 30, 2017. Also, as of Jun 30, 2018, tangible return on average tangible common equity was 12.4%, up from 10.2% a year ago.
Share Repurchases
During the reported quarter, Zions repurchased $120 million worth of shares.
Outlook
Management expects pre-provision net revenue growth rate to be in the high single digit.
Net interest income has been forecasted to increase moderately in the next 12 months and customer-related fees to increase slightly.
Loan growth is expected to be at mid-single digit rate. The growth will likely be driven by moderate to strong growth in 1-4 family, municipal, C&I and owner-occupied loans as well as stable to slight increase in Oil &Gas loans, partially offset by moderate decline in national real estate loans.
Adjusted non-interest expenses are expected to increase at low-single digit rate of growth.
Effective tax rate is anticipated to be approximately 23% for 2018.
Loan loss provisions are projected to be in a modest range in the next 12 months.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
Currently, Zions has a poor Growth Score of F, however its Momentum is doing a bit better with a D. However, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable soley for value based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Zions has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.