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Commerce (CBSH) Up 7.3% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Commerce Bancshares (CBSH - Free Report) . Shares have added about 7.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Commerce 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.
Commerce Bancshares Q4 Earnings Beat, Revenues Down Y/Y
Commerce Bancshares’ fourth-quarter 2020 earnings per share of $1.11 surpassed the Zacks Consensus Estimate of 95 cents. Also, the bottom line came in 26.1% higher than the prior-year quarter.
Results benefited from improvement in net interest income and provision benefits. Also, the company recorded a rise in deposit balance. However, decline in non-interest income, a modest rise in expenses and lower loan balance, along with lower rates, acted as headwinds.
Net income attributable to common shareholders was $129.9 million, up 24.1% from the prior-year quarter.
In 2020, earnings of $2.91 per share beat the consensus estimate of $2.78 but fell 14.7% year over year. Net attributable to common shareholders of $342.1 million declined 17% from 2019.
Revenues Down, Expenses Rise
Total revenues for the reported quarter were $344.9 million, down marginally from the prior-year quarter. However, the top line outpaced the Zacks Consensus Estimate of $341.6 million.
In 2020, total revenues declined nearly 1% year over year to $1.34 billion. The top line marginally missed the consensus estimate.
Net interest income came in at $209.8 million, up 3.5% year over year. However, net yield on interest-earning assets contracted 56 basis points (bps) to 2.80%.
Non-interest income was $135.1 million, reflecting a decline of 5.8%. This was mainly due to fall in almost all fee income components, except for loan fees and sales, trust fees and capital market fees.
Non-interest expenses slightly increased to $196.3 million, primarily on higher marketing, salaries and employee benefit, and data processing and software costs.
The efficiency ratio increased to 56.68% from 56.29% reported in the year-ago quarter. A rise in efficiency ratio indicates deterioration in profitability.
As of Dec 31, 2020, total loans were $16.3 billion, down marginally from the prior quarter. Total deposits as of the same date were $26.9 billion, up 4.8%. Total stockholders’ equity was $3.4 billion as of Dec 31, 2020, reflecting a rise 2.8% sequentially.
Credit Quality: Mixed Bag
Provision for credit losses was a benefit of $4.4 million compared with provision of $15.2 million recorded in the prior year quarter. The ratio of annualized net loan charge-offs to total average loans was 0.19%, down from the prior-year quarter’s 0.42%.
However, total non-performing assets as of Dec 31, 2020 were $26.6 million, up significantly from $10.6 million on Dec 31, 2019.
Capital & Profitability Ratios Deteriorate
As of Dec 31, 2020, Tier I leverage ratio was 9.45%, down from the 11.38% recorded in the year-ago quarter. Also, tangible common equity to tangible assets ratio declined to 9.92% from the prior-year quarter’s 10.99%.
At the end of the fourth quarter, return on average assets was 1.63%, down from the year-ago period’s 1.65%. Return on average common equity was 15.49%, up from the 13.90% in the prior-year quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 7.39% due to these changes.
VGM Scores
Currently, Commerce has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Commerce has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Commerce (CBSH) Up 7.3% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Commerce Bancshares (CBSH - Free Report) . Shares have added about 7.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Commerce 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.
Commerce Bancshares Q4 Earnings Beat, Revenues Down Y/Y
Commerce Bancshares’ fourth-quarter 2020 earnings per share of $1.11 surpassed the Zacks Consensus Estimate of 95 cents. Also, the bottom line came in 26.1% higher than the prior-year quarter.
Results benefited from improvement in net interest income and provision benefits. Also, the company recorded a rise in deposit balance. However, decline in non-interest income, a modest rise in expenses and lower loan balance, along with lower rates, acted as headwinds.
Net income attributable to common shareholders was $129.9 million, up 24.1% from the prior-year quarter.
In 2020, earnings of $2.91 per share beat the consensus estimate of $2.78 but fell 14.7% year over year. Net attributable to common shareholders of $342.1 million declined 17% from 2019.
Revenues Down, Expenses Rise
Total revenues for the reported quarter were $344.9 million, down marginally from the prior-year quarter. However, the top line outpaced the Zacks Consensus Estimate of $341.6 million.
In 2020, total revenues declined nearly 1% year over year to $1.34 billion. The top line marginally missed the consensus estimate.
Net interest income came in at $209.8 million, up 3.5% year over year. However, net yield on interest-earning assets contracted 56 basis points (bps) to 2.80%.
Non-interest income was $135.1 million, reflecting a decline of 5.8%. This was mainly due to fall in almost all fee income components, except for loan fees and sales, trust fees and capital market fees.
Non-interest expenses slightly increased to $196.3 million, primarily on higher marketing, salaries and employee benefit, and data processing and software costs.
The efficiency ratio increased to 56.68% from 56.29% reported in the year-ago quarter. A rise in efficiency ratio indicates deterioration in profitability.
As of Dec 31, 2020, total loans were $16.3 billion, down marginally from the prior quarter. Total deposits as of the same date were $26.9 billion, up 4.8%. Total stockholders’ equity was $3.4 billion as of Dec 31, 2020, reflecting a rise 2.8% sequentially.
Credit Quality: Mixed Bag
Provision for credit losses was a benefit of $4.4 million compared with provision of $15.2 million recorded in the prior year quarter. The ratio of annualized net loan charge-offs to total average loans was 0.19%, down from the prior-year quarter’s 0.42%.
However, total non-performing assets as of Dec 31, 2020 were $26.6 million, up significantly from $10.6 million on Dec 31, 2019.
Capital & Profitability Ratios Deteriorate
As of Dec 31, 2020, Tier I leverage ratio was 9.45%, down from the 11.38% recorded in the year-ago quarter. Also, tangible common equity to tangible assets ratio declined to 9.92% from the prior-year quarter’s 10.99%.
At the end of the fourth quarter, return on average assets was 1.63%, down from the year-ago period’s 1.65%. Return on average common equity was 15.49%, up from the 13.90% in the prior-year quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 7.39% due to these changes.
VGM Scores
Currently, Commerce has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Commerce has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.