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UMB (UMBF) Up 0.6% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for UMB Financial (UMBF - Free Report) . Shares have added about 0.6% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is UMB due for a pullback? 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.

UMB Financial Q3 Earnings Top on High Revenues

UMB Financial reported third-quarter 2019 net operating earnings of $1.27 per share, surpassing the Zacks Consensus Estimate of $1.17. The reported figure compares favorably with the prior-year quarter’s earnings of $1.16.

Higher revenues, aided by rising loans and deposit balances, supported the results. However, reduction in net interest margin was a major drag. Further, higher provisions and elevated expenses were the undermining factors.

Including certain non-recurring items, the company reported net income of $62.4 million for the reported quarter, up from the $57.8 million recorded in the prior-year quarter.

Increase in Revenues, Loans & Deposits Balance, Costs Flare Up

Total revenues for the July-September quarter came in at $271.9 million, up 8.2% year over year. Yet, the revenue figure lagged the Zacks Consensus Estimate of $276.9 million.

Net interest income came in at $168.3 million, reflecting an increase of 11.8% from the year-ago quarter. Increase in average loans and average loan yields, mainly led to this upside. Net Interest Margin (NIM) contracted 9 basis points (bps) to 3.09% from the prior-year quarter reported tally.

Non-interest income totaled $103.6 million, up 2.7% year over year. This upside resulted from a rise in most of the income components, partly muted by lower service charges on deposit accounts and other income.

Non-interest expenses (GAAP basis) came in at $191.4 million, up 6.1% from the year-ago tally, mainly due to rise in most of the expense components. Adjusted non-interest expenses were $191.2 million, up 6.1% year over year.

Efficiency ratio (GAAP basis) decreased to 70.7% from the prior-year quarter’s 71.27%. Fall in efficiency ratio indicates rose in profitability. Adjusted efficiency ratio was 70.63%, down from the year-earlier quarter’s 71.18%.

As of Sep 30, 2019, average loans and leases were around $12.9 billion, up 2.4% sequentially. Additionally, average deposits climbed 2.7% from the prior-quarter’s end to $19.3 billion.

Credit Quality: A Mixed Bag

Total non-accrual and restructured loans came in at $71.8 million, up 41.9% year over year. Further, provision for loan losses came in at $7.5 million, up 30.4% from the year-earlier quarter. Yet, the ratio of net charge-offs to average loans was 0.07% in the reported quarter, down 2 bps from the year-ago quarter.

Strong Capital & Profitability Ratios

As of Sep 30, 2019, Tier 1 risk-based capital ratio was 12.53% compared with 13.47% as of Sep 30, 2018. Further, total risk-based capital ratio was 13.51% compared with 14.54% at the end of the prior-year quarter. Tier 1 leverage ratio was 9.62% compared with 10.58% as of Sep 30, 2018.

Adjusted return on average assets at the quarter’s end was 1.04%, down from 1.11% in the year-ago quarter. Additionally, return on average equity was 9.72% compared with 10.35% in the prior-year quarter.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, UMB has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, UMB has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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