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Commerce Bancshares (CBSH) Up 7.3% Since Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Commerce Bancshares, Inc. (CBSH - Free Report) . Shares have added about 7.3% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it 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 drivers.
Commerce Bancshares Q4 Earnings Beat Estimates
Commerce Bancshares’ fourth-quarter 2016 earnings of $0.68 per share surpassed the Zacks Consensus Estimate of $0.67. Moreover, the figure reflects a 13.3% rise from the year-ago quarter.
Better-than-expected results were primarily driven by an increase in both net interest income and non-interest income. Moreover, the company witnessed solid growth in both loans and deposits. However, rising expenses and an increase in provisions were the undermining factors.
Net income available to the common shareholders in the reported quarter was $69.3 million, up 12.8% year over year.
The company reported 2016 earnings per share of $2.61, up 7.4% year over year. However, the figure lagged the Zacks Consensus Estimate of $2.65. Also, net income available to common shareholders came in at $266.4 million, reflecting an increase of 4.6% from the prior year.
Revenue Growth Offsets Escalating Expenses
Total revenue for the quarter was $292.7 million, an increase of 5.1% year over year. However, the figure lagged the Zacks Consensus Estimate of $297.4 million.
Also, revenues for 2016 came in at $1.15 billion, up 6.6% year over year. However, the figure marginally lagged the Zacks Consensus Estimate of $1.17 billion.
Quarterly net interest income increased 6.6% year over year to $173.2 million. The rise reflected higher interest income, partially offset by a growing interest expense.
Non-interest income summed $119.5 million, up 3% year over year. The increase was driven by an improvement in all the components except bank card transaction fees and capital market fees.
Non-interest expenses rose 3.1% year over year to $181.3 million triggered by a rise in salaries and employee benefits costs, net occupancy expenses, data processing and software costs and deposit insurance.
Efficiency ratio for the quarter declined to 61.82% from 62.97% in the prior-year quarter. A fall in efficiency ratio indicates higher profitability.
Strong Balance Sheet
As of Dec 31, 2016, total loans summed $13.41 billion, up 1.4% sequentially. Also, total deposits as on the same date came in at $21.10 billion, up 4.6% from the prior month.
However, total stockholder’s equity was $2.50 billion as of Dec 31, 2016, a fall of 2.3% from the previous month.
Credit Quality: A Mixed Bag
Allowance for loan losses, as a percent of total loans, for the quarter was 1.16%, down 6 basis points (bps) year over year. Further, net loan charge-offs to average loans ratio (annualized) declined 3 bps year over year to 0.27%.
However, provision for loan losses increased 13.2% year over year to $10.4 million.
Improving Profitability & Strong Capital Position
As of Dec 31, 2016, Tier I leverage ratio was 9.55%, rising 32 bps year over year. Moreover, tangible common equity to tangible assets ratio grew 18 bps year over year to 8.66%.
Further, the company’s return on average assets improved 9 bps year over year to 1.14%, and return on average common equity came up 60 bps year over year to 11.48%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.
At this time, Commerce Bancshares' stock has a subpar Growth Score of 'D', though it is lagging a bit on the momentum 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 aggregte VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Commerce Bancshares (CBSH) Up 7.3% Since Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Commerce Bancshares, Inc. (CBSH - Free Report) . Shares have added about 7.3% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it 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 drivers.
Commerce Bancshares Q4 Earnings Beat Estimates
Commerce Bancshares’ fourth-quarter 2016 earnings of $0.68 per share surpassed the Zacks Consensus Estimate of $0.67. Moreover, the figure reflects a 13.3% rise from the year-ago quarter.
Better-than-expected results were primarily driven by an increase in both net interest income and non-interest income. Moreover, the company witnessed solid growth in both loans and deposits. However, rising expenses and an increase in provisions were the undermining factors.
Net income available to the common shareholders in the reported quarter was $69.3 million, up 12.8% year over year.
The company reported 2016 earnings per share of $2.61, up 7.4% year over year. However, the figure lagged the Zacks Consensus Estimate of $2.65. Also, net income available to common shareholders came in at $266.4 million, reflecting an increase of 4.6% from the prior year.
Revenue Growth Offsets Escalating Expenses
Total revenue for the quarter was $292.7 million, an increase of 5.1% year over year. However, the figure lagged the Zacks Consensus Estimate of $297.4 million.
Also, revenues for 2016 came in at $1.15 billion, up 6.6% year over year. However, the figure marginally lagged the Zacks Consensus Estimate of $1.17 billion.
Quarterly net interest income increased 6.6% year over year to $173.2 million. The rise reflected higher interest income, partially offset by a growing interest expense.
Non-interest income summed $119.5 million, up 3% year over year. The increase was driven by an improvement in all the components except bank card transaction fees and capital market fees.
Non-interest expenses rose 3.1% year over year to $181.3 million triggered by a rise in salaries and employee benefits costs, net occupancy expenses, data processing and software costs and deposit insurance.
Efficiency ratio for the quarter declined to 61.82% from 62.97% in the prior-year quarter. A fall in efficiency ratio indicates higher profitability.
Strong Balance Sheet
As of Dec 31, 2016, total loans summed $13.41 billion, up 1.4% sequentially. Also, total deposits as on the same date came in at $21.10 billion, up 4.6% from the prior month.
However, total stockholder’s equity was $2.50 billion as of Dec 31, 2016, a fall of 2.3% from the previous month.
Credit Quality: A Mixed Bag
Allowance for loan losses, as a percent of total loans, for the quarter was 1.16%, down 6 basis points (bps) year over year. Further, net loan charge-offs to average loans ratio (annualized) declined 3 bps year over year to 0.27%.
However, provision for loan losses increased 13.2% year over year to $10.4 million.
Improving Profitability & Strong Capital Position
As of Dec 31, 2016, Tier I leverage ratio was 9.55%, rising 32 bps year over year. Moreover, tangible common equity to tangible assets ratio grew 18 bps year over year to 8.66%.
Further, the company’s return on average assets improved 9 bps year over year to 1.14%, and return on average common equity came up 60 bps year over year to 11.48%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.
Commerce Bancshares, Inc. Price and Consensus
Commerce Bancshares, Inc. Price and Consensus | Commerce Bancshares, Inc. Quote
VGM Scores
At this time, Commerce Bancshares' stock has a subpar Growth Score of 'D', though it is lagging a bit on the momentum 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 aggregte VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.