It has been about a month since the last earnings report for Washington Federal (WAFD Quick QuoteWAFD - Free Report) . Shares have lost about 1.4% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Washington Federal 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 catalysts.

Washington Federal Q2 Earnings Lag Estimates, Costs Up

Washington Federal’s second-quarter fiscal 2022 (ended Mar 31) earnings of 70 cents per share missed the Zacks Consensus Estimate by a penny. The figure, however, reflects a year-over-year jump of 25%.

Results primarily benefited from higher revenues, provision benefits and a robust loan balance. However, an increase in expenses was the undermining factor.
 
Net income available to common shareholders was $45.7 million, rising 8.4% from the prior-year period.

Revenues & Expenses Rise

Net revenues were $150.7 million, up 8.8% from the year-ago quarter. The top line also beat the Zacks Consensus Estimate of $148.8 million.

Net interest income was $135.1 million, up 8.9% from the year-earlier period. Net interest margin was 2.90%, rising 15 basis points (bps).

Total other income of $15.7 million grew 8.2%. This increase was mainly driven by a rise in loan fee income and deposit fee income.

Other expenses amounted to $88.4 million, up 8.2% year over year. Higher compensation and benefits, occupancy, product delivery and other expenses largely led to this rise.

The company’s efficiency ratio was 58.65%, down from 59.02% recorded a year ago. A fall in efficiency ratio indicates improved profitability.

At the end of the fiscal second quarter, the return on average common equity was 9.80%, up from 8.17% at the end of the year-earlier quarter. Return on average assets was 0.98%, up from 0.93%.

Loans and Deposit Rise

As of Mar 31, 2022, net loans receivables amounted to $15.1 billion, up from 13.8 billion as of Sep 30, 2021. Also, total customer deposits were $16.4 billion, up from $15.5 billion as of Sep 30, 2021.

Credit Quality Improves

As of Mar 31, 2022, the allowance for credit losses (including reserve for unfunded commitments) was 1.13% of gross loans outstanding, down 17 bps year over year. The ratio of non-performing assets to total assets was 0.23%, down 2 bps.

During the quarter, provision for credit losses was a benefit of $0.5 million against no provision in the year-ago quarter.

Share Repurchase Update

During the quarter, Washington Federal repurchased 4,684 shares at an average price of $34.65 per share.

How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted 13.77% due to these changes.

VGM Scores

At this time, Washington Federal has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Washington Federal has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.