It has been about a month since the last earnings report for Zions (ZION Quick QuoteZION - Free Report) . Shares have added about 29.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Zions 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.

Zions Q3 Earnings & Revenues Top Estimates, Decline Y/Y

Zions’ third-quarter 2020 net earnings per share of $1.01 surpassed the Zacks Consensus Estimate of 86 cents. However, the bottom line compares unfavorably with the year-ago quarter’s $1.17.

Results reflect higher non-interest income and a rise in deposits balance. However, a significant rise in provision for credit losses and expenses, along with a fall in net interest income were concerns.

Net income attributable to common shareholders was $167 million, down from the prior-year quarter’s $214 million.

Revenues Decline, Expenses Rise

Net revenues came in at $712 million, down marginally year over year. However, the top line surpassed the Zacks Consensus Estimate of $708 million.

Net interest income was $555 million, down 2% from the prior-year quarter. This downside resulted from a fall in interest income. Net interest margin contracted 42 basis points (bps) year over year to 3.06%.

Non-interest income amounted to $157 million, up 7.5% from the year-ago quarter. This upswing resulted from a rise in loan related fees and commercial account fees.

Adjusted non-interest expenses came in at $440 million, flaring up 6% from the prior-year quarter.

Efficiency ratio was 62.2%, up from the 57.3% reported in the prior-year period. A rise in efficiency ratio indicates a decrease in profitability.

As of Sep 30, 2020, net loans held for investment were $53.9 billion, down from the $54.3 billion recorded at the end of the prior quarter. Total deposits were $67.1 billion, up 2.1% from the $65.7 billion recorded at the end of second-quarter 2020.

Credit Quality Deteriorates

The ratio of non-performing assets to loans and leases as well as other real estate owned expanded 20 bps year over year to 0.68%. Provision for credit losses was $55 million compared with $10 million reported in the year-earlier quarter.

Moreover, net loan and lease charge-offs were $52 million at the end of the reported quarter compared with the $1 million witnessed in the year-earlier quarter.

Capital & Profitability Ratios Deteriorate

Tier 1 leverage ratio was 8.3% as of Sep 30, 2020, compared with the 9.3% recorded at the end of the prior-year quarter. Tier 1 risk-based capital ratio of 11.4% remained flat, year on year.

At the end of the September quarter, return on average assets was 0.89%, down from 1.25% as of Sep 30, 2019. Also, return on average tangible common equity was 11%, down from the 14.2% witnessed in the year-ago quarter.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 7.33% due to these changes.

VGM Scores

At this time, Zions has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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