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Why Is KeyCorp (KEY) Up 11% Since Last Earnings Report?
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It has been about a month since the last earnings report for KeyCorp (KEY - Free Report) . Shares have added about 11% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is KeyCorp 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.
KeyCorp’s fourth-quarter 2020 earnings of 56 cents per share surpassed the Zacks Consensus Estimate of 43 cents. Also, the figure was 24.4% higher than the prior-year quarter number.
Results for the reported quarter benefited from a rise in revenues, robust loan and deposit balances, and drastically lower provisions. However, lower rates and a rise in operating expenses were the undermining factors.
Net income from continuing operations attributable to common shareholders was $549 million, up 25.1% year over year.
For 2020, earnings per share of $1.26 surpassed the Zacks Consensus Estimate of $1.14 per share. However, the figure was 21.7% lower than the prior year’s reported number. Net income from continuing operations was $1.22 billion, down 24.1% year over year.
Revenues Improve & Expenses Increase
Total revenues in the reported quarter grew 12.7% year over year to $1.84 billion. Also, the figure surpassed the Zacks Consensus Estimate of $1.71 billion.
For the year, total revenues of $6.69 billion increased 5% year over year. The figure surpassed the Zacks Consensus Estimate of $6.58 billion.
Quarterly tax-equivalent net interest income (NII) increased 5.7% year over year to $1.04 billion. The rise was attributed to higher earning asset balances and loan fees, partially offset by lower NIM.
Taxable-equivalent NIM from continuing operations decreased 28 basis points (bps) to 2.70%.
Non-interest income was $802 million, increasing 23.2% year over year. The rise was due to an increase in almost all fee income components except for service charges on deposit accounts, corporate services income and corporate-owned life insurance income.
Non-interest expenses rose 15.1% to $1.13 billion. The increase was due to a rise in all cost components except for net occupancy expenses and costs related to intangible asset amortization.
At the fourth quarter end, average total deposits were $135.72 billion, up marginally from the prior quarter. Average total loans were $101.71 billion, down 3.1% on a sequential basis.
Credit Quality: Mixed Bag
Net loan charge-offs, as a percentage of average loans, increased 11 bps year over year to 0.53%. Allowance for loan and lease losses was $1.63 billion, surging 80.7%. Further, non-performing assets, as a percentage of period-end portfolio loans, other real estate owned properties assets and other non-performing assets were 0.92%, up 17 bps.
However, provision for credit losses fell 81.7% year over year to $20 million.
Capital Ratios Mixed
KeyCorp's tangible common equity to tangible assets ratio was 7.9% as of Dec 31, 2020, down from 8.6% in the corresponding period of 2019. Also, Tier 1 risk-based capital ratio was 11.1%, up from 10.9% in the prior-year quarter.
2021 Outlook
Management expects average loan balances to be stable compared to 2020. Deposits are expected to increase by low single digits.
Tax-equivalent NII (including ongoing participation in paycheck protection program (PPP)) is expected to be in line with the 2020 level.
The company expects non-interest income to be up by low-single digits.
Expenses are likely to decline by low-single digits.
Net charge-offs (NCOs) to average loans are expected to be in the 50-60 bps range.
GAAP tax rate is anticipated at 19%.
Long-Term Targets
The company expects to achieve cash efficiency ratio of 54-56%.
NCO rate is expected to be 40-60 bps.
Return on tangible common equity (ROTCE) is expected to be 16-19%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 10.86% due to these changes.
VGM Scores
At this time, KeyCorp has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise KeyCorp has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Why Is KeyCorp (KEY) Up 11% Since Last Earnings Report?
It has been about a month since the last earnings report for KeyCorp (KEY - Free Report) . Shares have added about 11% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is KeyCorp 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.
KeyCorp's Q4 Earnings Beat, Revenues & Expenses Rise Y/Y
KeyCorp’s fourth-quarter 2020 earnings of 56 cents per share surpassed the Zacks Consensus Estimate of 43 cents. Also, the figure was 24.4% higher than the prior-year quarter number.
Results for the reported quarter benefited from a rise in revenues, robust loan and deposit balances, and drastically lower provisions. However, lower rates and a rise in operating expenses were the undermining factors.
Net income from continuing operations attributable to common shareholders was $549 million, up 25.1% year over year.
For 2020, earnings per share of $1.26 surpassed the Zacks Consensus Estimate of $1.14 per share. However, the figure was 21.7% lower than the prior year’s reported number. Net income from continuing operations was $1.22 billion, down 24.1% year over year.
Revenues Improve & Expenses Increase
Total revenues in the reported quarter grew 12.7% year over year to $1.84 billion. Also, the figure surpassed the Zacks Consensus Estimate of $1.71 billion.
For the year, total revenues of $6.69 billion increased 5% year over year. The figure surpassed the Zacks Consensus Estimate of $6.58 billion.
Quarterly tax-equivalent net interest income (NII) increased 5.7% year over year to $1.04 billion. The rise was attributed to higher earning asset balances and loan fees, partially offset by lower NIM.
Taxable-equivalent NIM from continuing operations decreased 28 basis points (bps) to 2.70%.
Non-interest income was $802 million, increasing 23.2% year over year. The rise was due to an increase in almost all fee income components except for service charges on deposit accounts, corporate services income and corporate-owned life insurance income.
Non-interest expenses rose 15.1% to $1.13 billion. The increase was due to a rise in all cost components except for net occupancy expenses and costs related to intangible asset amortization.
At the fourth quarter end, average total deposits were $135.72 billion, up marginally from the prior quarter. Average total loans were $101.71 billion, down 3.1% on a sequential basis.
Credit Quality: Mixed Bag
Net loan charge-offs, as a percentage of average loans, increased 11 bps year over year to 0.53%. Allowance for loan and lease losses was $1.63 billion, surging 80.7%. Further, non-performing assets, as a percentage of period-end portfolio loans, other real estate owned properties assets and other non-performing assets were 0.92%, up 17 bps.
However, provision for credit losses fell 81.7% year over year to $20 million.
Capital Ratios Mixed
KeyCorp's tangible common equity to tangible assets ratio was 7.9% as of Dec 31, 2020, down from 8.6% in the corresponding period of 2019. Also, Tier 1 risk-based capital ratio was 11.1%, up from 10.9% in the prior-year quarter.
2021 Outlook
Management expects average loan balances to be stable compared to 2020. Deposits are expected to increase by low single digits.
Tax-equivalent NII (including ongoing participation in paycheck protection program (PPP)) is expected to be in line with the 2020 level.
The company expects non-interest income to be up by low-single digits.
Expenses are likely to decline by low-single digits.
Net charge-offs (NCOs) to average loans are expected to be in the 50-60 bps range.
GAAP tax rate is anticipated at 19%.
Long-Term Targets
The company expects to achieve cash efficiency ratio of 54-56%.
NCO rate is expected to be 40-60 bps.
Return on tangible common equity (ROTCE) is expected to be 16-19%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 10.86% due to these changes.
VGM Scores
At this time, KeyCorp has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise KeyCorp has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.