It has been about a month since the last earnings report for Comerica Incorporated (CMA Quick QuoteCMA - Free Report) . Shares have added about 3.5% in that time frame, outperforming the S&P 500.

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

Comerica Q4 Earnings Beat Estimates, Revenues Fall

Comerica delivered a fourth-quarter 2021 positive earnings surprise of 3.11%. Earnings per share of $1.66 surpassed the Zacks Consensus Estimate of $1.61. Also, the bottom line was higher than the prior-year quarter figure of $1.53.

Comerica’s results were supported by lower provisions and a robust fee income. Nevertheless, lower revenues due to reduction in NII were recorded. Moreover, higher expenses and a decline in loan balance were major drags.

Net income came in at $221 million in the quarter, up 2.8% year over year from $215 million.

In 2021, net income totaled $1.14 billion or a record $8.35 per share, up from the prior year’s $482 million or $3.43 per share. Full-year earnings outpaced the Zacks Consensus Estimate of $8.28.

Segment-wise, on a year-over-year basis, net income decreased 7% at Commercial Bank. Wealth Management and Retail segments reported a substantial year-over-year jump in net income. The Finance segment reported a loss of $71 million, narrower than the year-ago reported loss of $87 million.

Revenues Fall on Lower NII, Expenses Increase

Comerica’s fourth-quarter revenues were $750 million, up 2.2%% year over year. Also, the top line beat the consensus estimate of $735.4 million.

 In 2021, revenues climbed nearly 2% year over year to $2.96 billion.

NII decreased 1.7% on a year-over-year basis to $461 million in the quarter on lower rates. The NIM contracted 32 basis points to 2.04%.

Total non-interest income was $289 million, up 9.1% on a year-over-year basis. Higher fiduciary income, service charges on deposit accounts, commercial lending fees, derivative income and other noninterest income mainly supported the fee-income growth.

Non-interest expenses totaled $486 million, up 4.5% year over year. The upswing resulted chiefly from higher salaries and benefit expenses, outside processing fees and occupancy expenses.

The efficiency ratio was 64.61% compared with the prior-year quarter’s 63.26%. A rise in the ratio indicates lower profitability.

Decent Balance-Sheet Position

As of Dec 31, 2021, total assets and common shareholders' equity were $94.62 billion and $7.89 billion, respectively, compared with $94.53 billion and $7.80 billion as of Sep 30, 2020.

Average loans declined marginally on a sequential basis to $47.83 billion.

Nonetheless, average deposits increased 6.9% from the prior quarter’s level to $84.5 billion.

Strong Credit Quality

Total non-performing assets decreased 25.1% year over year to $269 million. The allowance for credit losses was $618 million, down from $992 million in the prior-year quarter. The allowance for loan losses to total loans ratio was 1.26% as of Dec 31, 2021, down from 1.9% as of Dec 31, 2020.

Net credit-related recoveries were $4 million against net credit-related charge-offs of $29 million in the prior-year quarter. A benefit to provision for credit losses of $25 million was recorded in the reported quarter compared with $17 million in the prior-year quarter.

Weak Capital Position

As of Dec 31, 2021, Comerica’s tangible common equity ratio was 7.30%, down from 8.02% in the prior-year quarter. The total capital ratio was 12.37%, declining from 13.20% in the year-ago quarter.

Common Equity Tier 1 (CET1) capital ratio was 10.15%, falling from 10.34% in the prior-year quarter.

Solid Capital-Deployment Activities

In the reported quarter, Comerica returned $139 million to its shareholders through share repurchases and dividends. Comerica repurchased $50 million of common stock under its share repurchase program and declared dividends of $89 million on its common stock.

Outlook

Comerica provided the guidance for 2022 on expectations of continued economic growth and no interest rate changes.

Average loans (excluding the paycheck protection program or PPP) are expected to grow in the mid-single-digit range. It will be unfavorably impacted by the forgiveness of PPP loans, and declines in Mortgage Banker and National Dealer Services.

Average deposits are expected to remain strong.

The company expects NII to reflect benefits of loan growth, partly offset by loan yield pressure. However, a decrease in PPP-related income is expected to more than offset loan growth.

Non-interest income is likely to be supported by customer-driven fee categories. However, these could be more than offset by lower cards, derivatives, warrants and deferred comps.

Non-interest expenses are estimated to rise in the low-single-digit range due to increased technology investments and insurance.

CET1 is targeted to be 10%.

The tax rate for 2022 is anticipated to be 22-23%, excluding discrete items.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Comerica Incorporated 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 F on the value side, putting it in the fifth quintile 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 indicates a downward shift. Notably, Comerica Incorporated has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.