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Washington Federal (WAFD) Up 13.2% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Washington Federal (WAFD - Free Report) . Shares have added about 13.2% in that time frame, outperforming the S&P 500.

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

Washington Federal Tops on Q3 Earnings as Revenues Rise

Washington Federal’s third-quarter fiscal 2022 (ended Jun 30) earnings of 91 cents per share surpassed the Zacks Consensus Estimate of 79 cents. The figure reflects a year-over-year jump of 49.2%.

Results were primarily aided by higher revenues and improving loan balances. However, an increase in expenses and higher provisions were the undermining factors.

Net income available to common shareholders was $59.6 million, rising 36.3% from the prior-year quarter.

Revenues Improve, Expenses Rise

Net revenues were $169.3 million, up 19.4% from the year-ago quarter. The top line also beat the Zacks Consensus Estimate of $159 million.

Net interest income was $151.7 million, up 18% from the year-earlier period. The net interest margin was 3.22%, rising 40 basis points (bps).

Total other income of $17.6 million grew 32.8% year over year. The increase was mainly driven by a rise in deposit fee income and other income.

Other expenses amounted to $87.4 million, up 4.5% year over year. Higher compensation and benefits, occupancy, product delivery and information technology expenses led to the rise.

The company’s efficiency ratio was 51.63%, down from 58.98% a year ago. A fall in the efficiency ratio indicates improved profitability.

At the end of the fiscal third quarter, the return on average common equity was 12.50%, up from 8.71% at the end of the year-earlier quarter. Return on average assets was 1.25%, up from 0.97%.

Loan Balances Rise, Deposits Decline

As of Jun 30, 2022, net loans receivable amounted to $15.6 billion, up 3.1% from the end of the prior quarter. Total customer deposits were $16 billion, down from $16.4 billion as of Mar 31, 2022.

Credit Quality: A Mixed Bag

As of Jun 30, 2022, the allowance for credit losses (including reserve for unfunded commitments) was 1.08% of gross loans outstanding, down 18 bps year over year.

However, the ratio of non-performing assets to total assets was 0.25%, up 2 bps. In the reported quarter, provision for credit losses was $1.5 million against a release of $2 million in the year-ago quarter.

Share Repurchase Update

During the quarter, Washington Federal repurchased 2,446 shares at an average price of $31.36 per share.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Washington Federal has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar 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 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 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.


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