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Why Is Prosperity Bancshares (PB) Down 6.4% Since the Last Earnings Report?
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A month has gone by since the last earnings report for Prosperity Bancshares, Inc. (PB - Free Report) . Shares have lost about 6.4% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? 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.
Prosperity Bancshares Beats on Q1 Earnings, Costs Down
Prosperity Bancshares’ first-quarter 2017 earnings per share of $0.99 surpassed the Zacks Consensus Estimate of $0.97. Moreover, the figure compared favorably with the prior-year quarter’s earnings of $0.98. Results included purchase accounting adjustments for both periods.
A decrease in expenses and a significant fall in provisions were responsible for the better-than-expected results. Also, improving loan balances was a positive for the company. However, a slight increase in non-interest income was offset by a decline in net interest income.
Prosperity Bancshares’ net income declined marginally year over year to $68.6 million.
Revenues & Expenses Decreased
Net revenue of $183.3 million for the reported quarter lagged the Zacks Consensus Estimate of $184.8 million. Moreover, the figure declined nearly 7% from the prior-year quarter.
Net interest income declined 8.3% year over year to $152.4 million, primarily due to a fall in loan discount accretion.
Also, net interest margin, on a tax equivalent basis, decreased 28 basis points (bps) to 3.20%.
However, non-interest income increased marginally year over year to $30.8 million.
Non-interest expenses were down 3.1% year over year to $78.1 million due to a fall in almost all expense components except regulatory assessments and FDIC insurance, other real estate expense and other noninterest expense.
Loans Increased, Deposits Declined
As of Mar 31, 2017, total loans were $9.7 billion, up 1.2% from the prior quarter. However, total deposits fell 1.6% from the previous quarter to $17.1 billion.
Credit Quality Improved
As of Mar 31, 2017, total nonperforming assets were $41.2 million, down 27.7% year over year. Also, the ratio of allowance for credit losses to total loans was down 1 bp year over year to 0.86%.
Further, net charge-offs totaled $3.9 million, down 66.5% from the year-ago quarter. Also, provision for credit losses declined more than 80% from the prior-year quarter to $2.7 million.
Capital Position Enhanced, Profitability Deteriorated
As of Mar 31, 2017, Tier-1 risk-based capital ratio came in at 14.45% compared with 13.20% as of Mar 31, 2016. Moreover, total risk-based capital ratio was 15.14%, up from 13.90% at the end of the year-ago quarter.
Also, common equity tier 1 capital ratio (under Basel III, effective Jan 1, 2015) was 14.45%, up from 13.20% in the prior-year quarter.
The annualized return on average assets fell 1 bp year over year to 1.23%. Similarly, annualized return on common equity was 7.45%, compared with 7.85% in the prior-year quarter.
Outlook
Prosperity Bancshares anticipates fair value accretion to come within $4.5–$5 million in the subsequent quarters.
Management remains optimistic, and expects organic loan growth to be in about 5% in 2017. Also it expects deposits to grow around 4% in 2017.
Management expects core margin to remain relatively stable in the coming quarters.
Management expects non-interest expenses to be around $78–$80 million on a quarterly basis, going forward.
The company expects effective tax to be around 33.5% going forward.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two downward revisions for the current quarter.
At this time, Prosperity Bancshares's stock has a subpar Growth Score of 'D', a grade with the same score on the momentum front. However, the stock was allocated a grade of 'B' on the value side, putting it in the top 40% 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.
The stock is suitable solely for value based on our styles scores.
Outlook
While estimates have been broadly trending downward for the stock, the magnitude of these revisions has been net zero. Notably, 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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Why Is Prosperity Bancshares (PB) Down 6.4% Since the Last Earnings Report?
A month has gone by since the last earnings report for Prosperity Bancshares, Inc. (PB - Free Report) . Shares have lost about 6.4% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it due for a breakout? 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.
Prosperity Bancshares Beats on Q1 Earnings, Costs Down
Prosperity Bancshares’ first-quarter 2017 earnings per share of $0.99 surpassed the Zacks Consensus Estimate of $0.97. Moreover, the figure compared favorably with the prior-year quarter’s earnings of $0.98. Results included purchase accounting adjustments for both periods.
A decrease in expenses and a significant fall in provisions were responsible for the better-than-expected results. Also, improving loan balances was a positive for the company. However, a slight increase in non-interest income was offset by a decline in net interest income.
Prosperity Bancshares’ net income declined marginally year over year to $68.6 million.
Revenues & Expenses Decreased
Net revenue of $183.3 million for the reported quarter lagged the Zacks Consensus Estimate of $184.8 million. Moreover, the figure declined nearly 7% from the prior-year quarter.
Net interest income declined 8.3% year over year to $152.4 million, primarily due to a fall in loan discount accretion.
Also, net interest margin, on a tax equivalent basis, decreased 28 basis points (bps) to 3.20%.
However, non-interest income increased marginally year over year to $30.8 million.
Non-interest expenses were down 3.1% year over year to $78.1 million due to a fall in almost all expense components except regulatory assessments and FDIC insurance, other real estate expense and other noninterest expense.
Loans Increased, Deposits Declined
As of Mar 31, 2017, total loans were $9.7 billion, up 1.2% from the prior quarter. However, total deposits fell 1.6% from the previous quarter to $17.1 billion.
Credit Quality Improved
As of Mar 31, 2017, total nonperforming assets were $41.2 million, down 27.7% year over year. Also, the ratio of allowance for credit losses to total loans was down 1 bp year over year to 0.86%.
Further, net charge-offs totaled $3.9 million, down 66.5% from the year-ago quarter. Also, provision for credit losses declined more than 80% from the prior-year quarter to $2.7 million.
Capital Position Enhanced, Profitability Deteriorated
As of Mar 31, 2017, Tier-1 risk-based capital ratio came in at 14.45% compared with 13.20% as of Mar 31, 2016. Moreover, total risk-based capital ratio was 15.14%, up from 13.90% at the end of the year-ago quarter.
Also, common equity tier 1 capital ratio (under Basel III, effective Jan 1, 2015) was 14.45%, up from 13.20% in the prior-year quarter.
The annualized return on average assets fell 1 bp year over year to 1.23%. Similarly, annualized return on common equity was 7.45%, compared with 7.85% in the prior-year quarter.
Outlook
Prosperity Bancshares anticipates fair value accretion to come within $4.5–$5 million in the subsequent quarters.
Management remains optimistic, and expects organic loan growth to be in about 5% in 2017. Also it expects deposits to grow around 4% in 2017.
Management expects core margin to remain relatively stable in the coming quarters.
Management expects non-interest expenses to be around $78–$80 million on a quarterly basis, going forward.
The company expects effective tax to be around 33.5% going forward.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two downward revisions for the current quarter.
Prosperity Bancshares, Inc. Price and Consensus
Prosperity Bancshares, Inc. Price and Consensus | Prosperity Bancshares, Inc. Quote
VGM Scores
At this time, Prosperity Bancshares's stock has a subpar Growth Score of 'D', a grade with the same score on the momentum front. However, the stock was allocated a grade of 'B' on the value side, putting it in the top 40% 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.
The stock is suitable solely for value based on our styles scores.
Outlook
While estimates have been broadly trending downward for the stock, the magnitude of these revisions has been net zero. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.