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It has been about a month since the last earnings report for Washington Federal (WAFD). Shares have added about 3.1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Washington Federal 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.
Washington Federal Q4 Earnings Meet, Revenues Beat
Washington Federal’s fourth-quarter fiscal 2019 (ended Sep 30) earnings came in at 66 cents per share, in line with the Zacks Consensus Estimate. The figure also reflects year-over-year growth of 6.5%.
Results benefited from a rise in revenues, decent growth in loan and deposit balances, and provision benefits. However, higher expense and lower interest rates were the undermining factors.
Net income for the quarter increased 1.6% year over year to $52.4 million.
For fiscal 2019, earnings of $2.61 per share were up 8.8% year over year, and matched the consensus estimate. Net income grew 3.1% to $210.3 million.
Revenues & Costs Increase
Net revenues for the reported quarter came in at $136.6 million, up 3.9% from the year-ago quarter. The figure marginally beat the Zacks Consensus Estimate of $136.2 million.
For fiscal 2019, net revenues were $543.4 million, up 5.3%. Also, the top line surpassed the consensus estimate of $539.8 million.
Net interest income was $120.2 million, up nearly 1% from the year-earlier quarter. However, net interest margin declined 14 basis points (bps) to 3.12%.
Total other income of $16.5 million grew 34.4% from the prior-year quarter. This upside was mainly driven by increase in other income and loan fee income.
Operating expenses were up 4.2% from the prior-year quarter to $72.5 million. Higher compensation and benefit, occupancy, information technology and other expenses led to this upswing.
The company’s efficiency ratio was 53.08%, up from 52.94% recorded a year ago. A rise in efficiency ratio indicates deterioration in profitability.
At the end of the fiscal fourth quarter, return on average common equity was 10.32%, up from 10.29% witnessed at the end of the prior-year quarter. Return on average assets was 1.26%, down from 1.31%.
Loans & Deposits Rise
As of Sep 30, 2019, net loans receivables amounted to $11.9 billion, up from $11.5 billion recorded on Sep 30, 2018. Also, customer deposit accounts were $12 billion, up from $11.4 billion.
Credit Quality Improves
As of Sep 30, 2019, the ratio of non-performing assets to total assets was 0.27%, down 17 bps year over year. Furthermore, the allowance for loan losses and reserve for unfunded commitments were 1.04% of gross loans outstanding, down from 1.06% recorded on Sep 30, 2018.
Additionally, release for loan losses was $1.9 million during the quarter against $5.5 million recorded a year ago.
Share Repurchase Update
During fiscal 2019, Washington Federal repurchased 4.1 million shares at average price of $30.46 per share.
Effective tax rate is expected to be roughly 21% going forward.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -7.38% due to these changes.
Currently, Washington Federal has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Washington Federal has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Washington Federal, Inc. (WAFD) : Free Stock Analysis Report
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