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Why Is Prosperity Bancshares (PB) Up 9% Since Last Earnings Report?
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A month has gone by since the last earnings report for Prosperity Bancshares (PB - Free Report) . Shares have added about 9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Prosperity Bancshares 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.
Prosperity Bancshares Q2 Earnings Top Estimates, Costs Rise
Prosperity Bancshares Inc.’s second-quarter 2018 earnings of $1.17 per share surpassed the Zacks Consensus Estimate of $1.15. Moreover, the figure improved 18.2% on a year-over-year basis.
Results were primarily driven by an improvement in revenues. Also, increasing loan balances supported results to some extent. However, an increase in expenses and higher provisions were the undermining factors.
Net income available to common shareholders for the reported quarter was $81.6 million, up from $68.6 million registered in the prior-year quarter.
Revenues Improve, Expenses Rise
Net revenues of $190.2 million in the reported quarter surpassed the Zacks Consensus Estimate of $186.5 million. Also, the figure increased 5.6% from the prior-year quarter.
Net interest income was $161.8 million, increasing nearly 6.3% year over year. The rise was primarily due to an increase in loan and investment yields and higher loan balances, partially offset by an increase in deposit rates.
Also, net interest margin, on a tax-equivalent basis, increased 14 basis points year over year to 3.28%.
Non-interest income increased 2.1% year over year to $28.4 million. This rise was driven by an increase in almost all components except bank owned life insurance income, service charges on deposit accounts and trust income.
Non-interest expenses flared up 9.4% year over year to $83.6 million. The upsurge resulted from rise in almost all cost components, except core deposit intangible amortization costs, communication expenses and other real estate costs.
Solid Balance Sheet
As of Jun 30, 2018, total loans were $10.1 billion, up 1.3% from the prior-quarter end. Total deposits decreased 2% from the previous-quarter end to nearly $17 billion.
Credit Quality: A Mixed Bag
As of Jun 30, 2018, total non-performing assets were $31.6 million, decreasing 33.7% year over year. Also, the ratio of allowance for credit losses to total loans was down 1 bps year over year to 0.84%. Further, net charge-offs totaled $2.6 million, down from the year-ago quarter figure of $3.1 million.
However, provision for credit losses increased 45.5% from the prior-year quarter to $4 million.
Capital & Profitability Ratios Improve
As of Jun 30, 2018, Tier-1 risk-based capital ratio was 15.65%, up from 14.80% as of Jun 30, 2017. Moreover, total risk-based capital ratio was 16.32%, up from 15.49% at the end of the year-ago quarter.
Also, common equity Tier 1 capital ratio was 15.65%, up from 14.80% in the prior-year quarter.
The annualized return on average assets was 1.44% at the end of the reported quarter, up from 1.22% in the prior-year quarter. Similarly, annualized return on common equity was 8.33% compared with 7.36% in the year-earlier quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Prosperity Bancshares has a poor Growth Score of F, however its momentum is doing a lot better with a C. Following the exact same course, 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.
Zacks style scores indicate that the company's stock is suitable for value and momentum investors.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Prosperity Bancshares 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 Prosperity Bancshares (PB) Up 9% Since Last Earnings Report?
A month has gone by since the last earnings report for Prosperity Bancshares (PB - Free Report) . Shares have added about 9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Prosperity Bancshares 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.
Prosperity Bancshares Q2 Earnings Top Estimates, Costs Rise
Prosperity Bancshares Inc.’s second-quarter 2018 earnings of $1.17 per share surpassed the Zacks Consensus Estimate of $1.15. Moreover, the figure improved 18.2% on a year-over-year basis.
Results were primarily driven by an improvement in revenues. Also, increasing loan balances supported results to some extent. However, an increase in expenses and higher provisions were the undermining factors.
Net income available to common shareholders for the reported quarter was $81.6 million, up from $68.6 million registered in the prior-year quarter.
Revenues Improve, Expenses Rise
Net revenues of $190.2 million in the reported quarter surpassed the Zacks Consensus Estimate of $186.5 million. Also, the figure increased 5.6% from the prior-year quarter.
Net interest income was $161.8 million, increasing nearly 6.3% year over year. The rise was primarily due to an increase in loan and investment yields and higher loan balances, partially offset by an increase in deposit rates.
Also, net interest margin, on a tax-equivalent basis, increased 14 basis points year over year to 3.28%.
Non-interest income increased 2.1% year over year to $28.4 million. This rise was driven by an increase in almost all components except bank owned life insurance income, service charges on deposit accounts and trust income.
Non-interest expenses flared up 9.4% year over year to $83.6 million. The upsurge resulted from rise in almost all cost components, except core deposit intangible amortization costs, communication expenses and other real estate costs.
Solid Balance Sheet
As of Jun 30, 2018, total loans were $10.1 billion, up 1.3% from the prior-quarter end. Total deposits decreased 2% from the previous-quarter end to nearly $17 billion.
Credit Quality: A Mixed Bag
As of Jun 30, 2018, total non-performing assets were $31.6 million, decreasing 33.7% year over year. Also, the ratio of allowance for credit losses to total loans was down 1 bps year over year to 0.84%. Further, net charge-offs totaled $2.6 million, down from the year-ago quarter figure of $3.1 million.
However, provision for credit losses increased 45.5% from the prior-year quarter to $4 million.
Capital & Profitability Ratios Improve
As of Jun 30, 2018, Tier-1 risk-based capital ratio was 15.65%, up from 14.80% as of Jun 30, 2017. Moreover, total risk-based capital ratio was 16.32%, up from 15.49% at the end of the year-ago quarter.
Also, common equity Tier 1 capital ratio was 15.65%, up from 14.80% in the prior-year quarter.
The annualized return on average assets was 1.44% at the end of the reported quarter, up from 1.22% in the prior-year quarter. Similarly, annualized return on common equity was 8.33% compared with 7.36% in the year-earlier quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Prosperity Bancshares has a poor Growth Score of F, however its momentum is doing a lot better with a C. Following the exact same course, 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.
Zacks style scores indicate that the company's stock is suitable for value and momentum investors.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Prosperity Bancshares has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.