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Cullen/Frost (CFR) Up 12.7% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Cullen/Frost Bankers (CFR - Free Report) . Shares have added about 12.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Cullen/Frost 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.

Cullen/Frost Q4 Earnings Top Estimates, Revenues Down

Cullen/Frost reported fourth-quarter 2020 earnings per share of $1.38, which handily surpassed the Zacks Consensus Estimate of $1.30. However, it compared unfavorably with the prior-year quarter figure of $1.60 per share.

Results reflect strong capital position and improved deposit balance. However, decline in revenues was a major drag in the quarter. Also, higher provisions acted as an undermining factor.

It reported net income available to common shareholders of $88.3 million compared with $101.7 million in the prior-year quarter.

In 2020, earnings of $5.19 per share beat the consensus estimate of $5.04 but fell 25.3% year over year. Net income available to common shareholders of $323.6 million declined 26% from 2019.

Revenues Fall, Expenses Rise

The company’s total revenues were $357.1 million in the fourth quarter, down 3.6% from $370.3 million in the prior-year quarter. The top line, however, outpaced the Zacks Consensus Estimate of $351.3 million.

In 2020, total revenues climbed nearly 5% year over year to $1.54 billion. Also, the top line marginally surpassed the consensus estimate of $1.53 billion.

Net interest income on a taxable-equivalent basis slipped 3.4% year over year to $265.7 million in the quarter. Additionally, net interest margin contracted 80 basis points (bps) to 2.82%.

Non-interest income declined 4.1% to $91.3 million on a year-over-year basis. This fall mainly resulted from lower service charges on deposit accounts, insurance commissions and fees and other income.

Non-interest expenses of $222.9 million rose nearly 1% year over year. A rise in almost all the cost components, except for employee benefits and intangible amortization resulted in higher expenses in the reported quarter.

As of Dec 31, 2020, total loans were $17.5 billion, down 4.1% sequentially. Total deposits amounted to $33.5 billion, up 4.5% from the prior quarter.

Credit Quality: A Mixed Bag

As of Dec 31, 2020, credit loss expense more than doubled to $13.8 million on a year-over-year basis on the coronavirus crisis. Allowance for loan losses, as a percentage of total loans, was 1.51%, up 61 bps from the prior-year quarter.

However, net charge-offs, annualized as a percentage of average loans, contracted 4 bps to 0.30%. Also, non-performing assets were $62.3 million, down 43.1%.

Profitability and Capital Ratios

As of Dec 31, 2020, Tier 1 risk-based capital ratio was 13.47% compared with 12.99% recorded at the end of the prior-year quarter. Total risk-based capital ratio was 15.44%, up from 14.57% as of Dec 31, 2019. Furthermore, leverage ratio moved down to 8.07% from 9.28%. Common Equity Tier 1 Risk-Based Capital Ratio was 12.86% compared with the previous-year quarter’s 12.36%.

Return on average assets and return on average common equity were 0.86% and 8.55%, respectively, compared with 1.21% and 10.74% witnessed in the prior-year quarter.


The company expects non-interest expenses in 2021 to grow in the range of 4-4.5% from that reported in 2020.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, Cullen/Frost 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.


Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Cullen/Frost 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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