A month has gone by since the last earnings report for Commerce Bancshares (CBSH Quick QuoteCBSH - Free Report) . Shares have added about 3.4% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.

Commerce Bancshares Q3 Earnings Miss, Revenues Rise Y/Y

Commerce Bancshares’ third-quarter 2022 earnings of $1.02 per share missed the Zacks Consensus Estimate of $1.04. The bottom line, however, increased 3% from the prior-year quarter.

Results were primarily hurt by a marginal rise in expenses and higher provisions. However, an increase in revenues and higher loan balances were tailwinds. Supported by higher interest rates, the company recorded an improvement in margins.

Net income attributable to common shareholders of $122.8 million increased marginally year over year.

Revenues Improve, Expenses Rise Marginally

Total revenues were $384.9 million, growing 9.5% year over year. The top line marginally outpaced the Zacks Consensus Estimate of $384.6 million.

Net interest income was $246.4 million, up 15.1% year over year. Net yield on interest-earning assets was 3.01%, which expanded 43 basis points (bps) year over year.

Non-interest income was $138.5 million, up marginally from the prior-year quarter. The rise was driven by an increase in almost all components of fee income, except for trust fees, deposit account charges and other fees, capital market fees, and loan fees and sales.

Non-interest expenses increased marginally year over year to $212.9 million. The rise was due to an increase in almost all cost components except for other expenses.

The efficiency ratio declined to 55.19% from 59.95% in the year-ago quarter. A fall in the efficiency ratio indicates an improvement in profitability.

As of Sep 30, 2022, total loans were $15.9 billion, up 1.4% from the prior quarter. Total deposits as of the same date were $27.5 billion, down 2.5% sequentially.

Credit Quality: Mixed Bag

Provision for credit losses was $15.3 million against a benefit of $7.4 million in the prior-year quarter. The ratio of annualized net loan charge-offs to total average loans was 0.12%, up from 0.10% in the year-earlier quarter.

Non-accrual loans to total loans were 0.05%, down 2 bps year over year. The allowance for credit losses on loans to total loans was 0.90%, declining 17 bps.

Capital Ratios Mixed, Profitability Ratios Improve

As of Sep 30, 2022, Tier I leverage ratio was 9.87%, up from 9.31% in the year-ago quarter. The tangible common equity to tangible assets ratio declined to 6.80% from the prior-year quarter’s 9.71%.

At the end of the third quarter, return on total average assets was 1.48%, up from the year-ago period’s 1.40%. Return on average common equity was 17.84%, up from 13.74%.

Share Repurchase Update

During the reported quarter, Commerce Bancshares repurchased 710,879 shares at an average price of $70.50 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Commerce has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 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.

Outlook

Estimates have been 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.