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Why Is Synovus Financial (SNV) Down 1.5% Since its Last Earnings Report?
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A month has gone by since the last earnings report for Synovus Financial Corp. (SNV - Free Report) . Shares have lost about 1.5% in the past month, outperforming the market.
Will the recent negative trend continue leading up to its next earnings release, or is SNV 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 drivers.
Synovus Beats Q4 Earnings Estimates, Expenses Flare Up
Driven by top-line strength, Synovus recorded a positive earnings surprise of 5.9% in fourth-quarter 2017. Adjusted earnings of 72 cents per share beat the Zacks Consensus Estimate of 68 cents. Also, the reported figure came in 33.3% higher than the prior-year quarter tally.
Higher revenues, backed by strong loan balances, drove organic growth. Notably, lower efficiency ratio was a tailwind. Moreover, a positive impact of rising rates was witnessed. However, escalating expenses and provisions remain a concern for investors.
Including the loss on early extinguishment of debt and charges, relating to the Federal tax reform, net income available to common shareholders came in at $27 million or 23 cents per share compared with $66 million or 54 cents per share recorded in the prior-year quarter.
For full-year 2017, adjusted earnings per share came in at $2.53 per share surpassing the Zacks Consensus Estimate of $2.50. Also, earnings compared favorably with the prior-year figure of $1.98. For full-year 2017, net income of $265.2 million was reported, up 12.1% year over year.
Top-Line Strength Reflected, Expenses Flare Up
For full-year 2017, the company reported revenues of $1.37 billion, up 16.7% on a year-over-year basis. Results also surpassed the Zacks Consensus Estimate of $1.32 billion.
Total revenues for the quarter came in at $339.1 million, rising 10.3% from the prior-year quarter. The reported figure surpassed the Zacks Consensus Estimate of $338.7 million.
Net interest income increased 15.5% from the year-ago quarter to $269.7 million. Further, net interest margin expanded 36 bps year over year to 3.65%.
Non-interest income decreased on a year-over-year basis to $69.4 million, primarily due to a decrease in other fee income and bank card fees. However, it got offset by an increase in fiduciary and asset management fees, and brokerage revenues. Adjusted non-interest income was $69.3 million, up 0.9% year over year.
On the other hand, total non-interest expenses were $226.5 million while adjusted non-interest expenses came in at $201.1 million, up 17.2% and 7.6%, respectively, from the prior-year quarter. Notably, increase in advertising, third party processing, and salaries and other personnel expenses led to the rise, partially offset by lower foreclosed real estate expenses and amortization of intangibles.
Adjusted efficiency ratio came in at 59.29% compared with 61.81% in the year-earlier quarter. A decline in ratio indicates improvement in profitability.
Total deposits came in at $26.1 billion, almost stable sequentially. Total net loans climbed 1.2% from the prior quarter to $24.8 billion.
Credit Quality: A Mixed Bag
Credit quality metrics for Synovus was a mixed bag in the quarter.
Net charge-offs climbed 7.9% year over year to $9 million. The annualized net charge-off ratio was 0.15%, up 1 bps from the year-earlier quarter. Provision for loan losses jumped 36.8% from the year-ago quarter to $8.6 million.
Non-performing loans were down 24.7% year over year to $115.6 million. The non-performing loan ratio came in at 0.47%, contracting 17 bps from the prior-year quarter.
Additionally, total non-performing assets amounted to $130.6 million, underlining a decline of 25.7%, whereas the non-performing asset ratio contracted 21 bps to 0.53%., year over year.
Capital Position Improves
Tier 1 capital ratio and total risk based capital ratio were 10.38% and 12.23%, respectively, compared with 10.07% and 12.01% as of Dec 31, 2016.
Also, as of Dec 31, 2017, Common Equity Tier 1 Ratio (fully phased-in) was 9.88% compared with 9.51% in the year-ago quarter. Tier 1 Leverage ratio was 9.19% compared with 8.99% in the comparable period last year.
Capital Deployment Update
During 2017, Synovus returned more than $175.1 million to shareholders, through common share repurchases, resulting in the repurchase of 4 million shares. Notably, during the fourth quarter, the company completed the $39.2 million common stock buyback program.
Additionally, the board of directors authorized a share repurchase program of up to $150 million of the company’s common stock, to be executed in 2018.
The board also announced a 67% increase in the quarterly common stock dividend from 15 cents to 25 cents per share. The new dividend will be paid in April 2018.
Outlook
For 2018, management projects average loan and average total deposits growth of around 4-6%. Loans are expected to rise driven by continued growth in consumer and C&I lending.
Net interest income is projected to grow in the range of 11-13%, on assumptions of a 25 bps rate hike each in March and September. On assumptions of no rate hike, increase in net interest income is expected to be between 9% and 11%.
Also, management remains focused on achieving adjusted non-interest income growth of 4-6% on investments in fee-producing business. Overall, adjusted revenues are projected to rise 9.5-11.5% in 2018.
Total non-interest expenses are projected to increase 0-3%. Also, management expects to maintain positive operating leverage.
The company expects net charge-off ratio of 15-25 bps.
Management expects the tax rate to be 23% to 24% in 2018.
Long-term Targets
The company expects EPS (earnings per share) to grow more than 10%.
Management projects adjusted efficiency ratio to be lower than 60%.
Ongoing efficiency initiative is expected to result in annual savings of approximately $2.5 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to two lower.
At this time, SNV has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was also 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.
Outlook
While estimates have been broadly trending downward for the stock, the magnitude of these revisions looks promising. Interestingly, SNV has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Synovus Financial (SNV) Down 1.5% Since its Last Earnings Report?
A month has gone by since the last earnings report for Synovus Financial Corp. (SNV - Free Report) . Shares have lost about 1.5% in the past month, outperforming the market.
Will the recent negative trend continue leading up to its next earnings release, or is SNV 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 drivers.
Synovus Beats Q4 Earnings Estimates, Expenses Flare Up
Driven by top-line strength, Synovus recorded a positive earnings surprise of 5.9% in fourth-quarter 2017. Adjusted earnings of 72 cents per share beat the Zacks Consensus Estimate of 68 cents. Also, the reported figure came in 33.3% higher than the prior-year quarter tally.
Higher revenues, backed by strong loan balances, drove organic growth. Notably, lower efficiency ratio was a tailwind. Moreover, a positive impact of rising rates was witnessed. However, escalating expenses and provisions remain a concern for investors.
Including the loss on early extinguishment of debt and charges, relating to the Federal tax reform, net income available to common shareholders came in at $27 million or 23 cents per share compared with $66 million or 54 cents per share recorded in the prior-year quarter.
For full-year 2017, adjusted earnings per share came in at $2.53 per share surpassing the Zacks Consensus Estimate of $2.50. Also, earnings compared favorably with the prior-year figure of $1.98. For full-year 2017, net income of $265.2 million was reported, up 12.1% year over year.
Top-Line Strength Reflected, Expenses Flare Up
For full-year 2017, the company reported revenues of $1.37 billion, up 16.7% on a year-over-year basis. Results also surpassed the Zacks Consensus Estimate of $1.32 billion.
Total revenues for the quarter came in at $339.1 million, rising 10.3% from the prior-year quarter. The reported figure surpassed the Zacks Consensus Estimate of $338.7 million.
Net interest income increased 15.5% from the year-ago quarter to $269.7 million. Further, net interest margin expanded 36 bps year over year to 3.65%.
Non-interest income decreased on a year-over-year basis to $69.4 million, primarily due to a decrease in other fee income and bank card fees. However, it got offset by an increase in fiduciary and asset management fees, and brokerage revenues. Adjusted non-interest income was $69.3 million, up 0.9% year over year.
On the other hand, total non-interest expenses were $226.5 million while adjusted non-interest expenses came in at $201.1 million, up 17.2% and 7.6%, respectively, from the prior-year quarter. Notably, increase in advertising, third party processing, and salaries and other personnel expenses led to the rise, partially offset by lower foreclosed real estate expenses and amortization of intangibles.
Adjusted efficiency ratio came in at 59.29% compared with 61.81% in the year-earlier quarter. A decline in ratio indicates improvement in profitability.
Total deposits came in at $26.1 billion, almost stable sequentially. Total net loans climbed 1.2% from the prior quarter to $24.8 billion.
Credit Quality: A Mixed Bag
Credit quality metrics for Synovus was a mixed bag in the quarter.
Net charge-offs climbed 7.9% year over year to $9 million. The annualized net charge-off ratio was 0.15%, up 1 bps from the year-earlier quarter. Provision for loan losses jumped 36.8% from the year-ago quarter to $8.6 million.
Non-performing loans were down 24.7% year over year to $115.6 million. The non-performing loan ratio came in at 0.47%, contracting 17 bps from the prior-year quarter.
Additionally, total non-performing assets amounted to $130.6 million, underlining a decline of 25.7%, whereas the non-performing asset ratio contracted 21 bps to 0.53%., year over year.
Capital Position Improves
Tier 1 capital ratio and total risk based capital ratio were 10.38% and 12.23%, respectively, compared with 10.07% and 12.01% as of Dec 31, 2016.
Also, as of Dec 31, 2017, Common Equity Tier 1 Ratio (fully phased-in) was 9.88% compared with 9.51% in the year-ago quarter. Tier 1 Leverage ratio was 9.19% compared with 8.99% in the comparable period last year.
Capital Deployment Update
During 2017, Synovus returned more than $175.1 million to shareholders, through common share repurchases, resulting in the repurchase of 4 million shares. Notably, during the fourth quarter, the company completed the $39.2 million common stock buyback program.
Additionally, the board of directors authorized a share repurchase program of up to $150 million of the company’s common stock, to be executed in 2018.
The board also announced a 67% increase in the quarterly common stock dividend from 15 cents to 25 cents per share. The new dividend will be paid in April 2018.
Outlook
For 2018, management projects average loan and average total deposits growth of around 4-6%. Loans are expected to rise driven by continued growth in consumer and C&I lending.
Net interest income is projected to grow in the range of 11-13%, on assumptions of a 25 bps rate hike each in March and September. On assumptions of no rate hike, increase in net interest income is expected to be between 9% and 11%.
Also, management remains focused on achieving adjusted non-interest income growth of 4-6% on investments in fee-producing business. Overall, adjusted revenues are projected to rise 9.5-11.5% in 2018.
Total non-interest expenses are projected to increase 0-3%. Also, management expects to maintain positive operating leverage.
The company expects net charge-off ratio of 15-25 bps.
Management expects the tax rate to be 23% to 24% in 2018.
Long-term Targets
The company expects EPS (earnings per share) to grow more than 10%.
Management projects adjusted efficiency ratio to be lower than 60%.
Ongoing efficiency initiative is expected to result in annual savings of approximately $2.5 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to two lower.
Synovus Financial Corp. Price and Consensus
Synovus Financial Corp. Price and Consensus | Synovus Financial Corp. Quote
VGM Scores
At this time, SNV has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was also 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.
Outlook
While estimates have been broadly trending downward for the stock, the magnitude of these revisions looks promising. Interestingly, SNV has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.