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Commerce (CBSH) Up 3.3% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Commerce Bancshares (CBSH - Free Report) . Shares have added about 3.3% in that time frame, outperforming 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 drivers.
Commerce Bancshares Q1 Earnings Lag on Higher Provisions
Commerce Bancshares, Inc.’s first-quarter 2020 earnings per share of 44 cents lagged the Zacks Consensus Estimate of 50 cents. Also, the bottom line represents a decline of 45.7% from the prior-year quarter.
Results were primarily hurt because of a significant increase in provisions. Moreover, higher expenses and lower net interest income (NII) were the undermining factors. Nevertheless, improvement in non-interest income supported results to some extent. Moreover, the balance sheet position remained strong during the quarter.
Net income attributable to common shareholders was $49.6 million, down 47.7% from the prior-year quarter.
Revenues Stable, Expenses Rise
Total revenues were $324.7 million, reflecting no change from the prior-year quarter. The top line surpassed the Zacks Consensus Estimate of $323.5 million.
NII was $201.1 million, down 1.2% year over year. Net yield on interest-earning assets declined to 3.33% from 3.52% recorded in the prior-year quarter.
Non-interest income was $123.7 million, up 2% year over year. The rise was due to an improvement in almost all fee income components, except for loan fees and sales, and other revenues.
Non-interest expenses rose 1.2% year over year to $193.7 million. The rise was due to an increase in all expense components, except for costs related to supplies and communication, and other expenses.
The efficiency ratio increased to 59.17% from 58.76% reported in the year-ago quarter. A rise in efficiency ratio indicates lower profitability.
Strong Balance Sheet
As of Mar 31, 2020, total loans were $15.1 billion, up 2.3% from the prior quarter. Total deposits as of the same date were $20.8 billion, up 1.2% from the previous quarter.
Total stockholders’ equity was $3.3 billion as of Mar 31, 2020, reflecting a rise of 3.7% from the prior quarter end.
Credit Quality: A Mixed Bag
Provision for credit losses for the reported quarter was $58 million, up significantly from $12.5 million recorded in the prior-year quarter.
The ratio of net loan charge-offs to average loans was 0.30%, down from 0.34% witnessed in the prior-year quarter. Allowance for loan losses as a percentage of total loans was 1.14%, unchanged year over year.
Capital Ratios Mixed, Profitability Ratios Worsen
As of Mar 31, 2020, Tier I leverage ratio was 11.13%, down from 11.67% recorded in the year-ago quarter. However, tangible common equity to tangible assets ratio grew to 11.13% from 11.06%.
At the end of the reported quarter, return on average assets was 0.80%, down from 1.58% witnessed in the year-ago quarter. Return on average common equity was 6.48%, down from 13.64% recorded 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, Commerce has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, 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 F. 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, Commerce has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Commerce (CBSH) Up 3.3% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Commerce Bancshares (CBSH - Free Report) . Shares have added about 3.3% in that time frame, outperforming 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 drivers.
Commerce Bancshares Q1 Earnings Lag on Higher Provisions
Commerce Bancshares, Inc.’s first-quarter 2020 earnings per share of 44 cents lagged the Zacks Consensus Estimate of 50 cents. Also, the bottom line represents a decline of 45.7% from the prior-year quarter.
Results were primarily hurt because of a significant increase in provisions. Moreover, higher expenses and lower net interest income (NII) were the undermining factors. Nevertheless, improvement in non-interest income supported results to some extent. Moreover, the balance sheet position remained strong during the quarter.
Net income attributable to common shareholders was $49.6 million, down 47.7% from the prior-year quarter.
Revenues Stable, Expenses Rise
Total revenues were $324.7 million, reflecting no change from the prior-year quarter. The top line surpassed the Zacks Consensus Estimate of $323.5 million.
NII was $201.1 million, down 1.2% year over year. Net yield on interest-earning assets declined to 3.33% from 3.52% recorded in the prior-year quarter.
Non-interest income was $123.7 million, up 2% year over year. The rise was due to an improvement in almost all fee income components, except for loan fees and sales, and other revenues.
Non-interest expenses rose 1.2% year over year to $193.7 million. The rise was due to an increase in all expense components, except for costs related to supplies and communication, and other expenses.
The efficiency ratio increased to 59.17% from 58.76% reported in the year-ago quarter. A rise in efficiency ratio indicates lower profitability.
Strong Balance Sheet
As of Mar 31, 2020, total loans were $15.1 billion, up 2.3% from the prior quarter. Total deposits as of the same date were $20.8 billion, up 1.2% from the previous quarter.
Total stockholders’ equity was $3.3 billion as of Mar 31, 2020, reflecting a rise of 3.7% from the prior quarter end.
Credit Quality: A Mixed Bag
Provision for credit losses for the reported quarter was $58 million, up significantly from $12.5 million recorded in the prior-year quarter.
The ratio of net loan charge-offs to average loans was 0.30%, down from 0.34% witnessed in the prior-year quarter. Allowance for loan losses as a percentage of total loans was 1.14%, unchanged year over year.
Capital Ratios Mixed, Profitability Ratios Worsen
As of Mar 31, 2020, Tier I leverage ratio was 11.13%, down from 11.67% recorded in the year-ago quarter. However, tangible common equity to tangible assets ratio grew to 11.13% from 11.06%.
At the end of the reported quarter, return on average assets was 0.80%, down from 1.58% witnessed in the year-ago quarter. Return on average common equity was 6.48%, down from 13.64% recorded 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, Commerce has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, 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 F. 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, Commerce has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.