A month has gone by since the last earnings report for BancorpSouth (BXS). Shares have lost about 4.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is BancorpSouth due for a breakout? 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.
BancorpSouth Q1 Earnings Top Estimates, Revenues Rise
BancorpSouth delivered a positive earnings surprise of 43.5% in first-quarter 2020 on higher interest income. Net operating earnings of 33 cents per share beat the Zacks Consensus Estimate of 23 cents. However, the bottom line compared unfavorably with the year-ago quarter’s figure of 56 cents.
Higher net revenues, aided by rise in interest income and non-interest revenues, were the driving factors. However, higher expenses were a major drag.
The company’s net income for the first quarter amounted to $21.9 million or 21 cents per share, up from $51.6 million or 52 cents reported in the year-ago quarter.
Revenues & Deposits Climb, Expenses Rise
Net revenues for the reported quarter increased 12.5% year over year to $244 million. Also, the top-line figure surpassed the Zacks Consensus Estimate of $243.9 million.
Net interest revenues for the quarter were $167.5 million, up 9.8% year over year. Fully-taxable equivalent net interest margin was 3.54%, contracting 32 basis points (bps) year over year.
Non-interest revenues increased 19.1% year over year to $76.5 million. Also, the figure included a negative mortgage servicing rights valuation adjustment of $11.1 million. The upswing resulted from rise in all the components, except for insurance commissions, annuity fees and net securities losses.
Non-interest expenses were $168 million, up 12% from the year-ago quarter. The upside stemmed primarily from the impact of higher salaries and employee benefits, net occupancy, and equipment expenses.
As of Mar 31, 2020, total deposits were $16.9 billion, up 3% sequentially, while loans and leases, net of unearned income, improved 0.9% sequentially to $14.2 billion.
Credit Quality Deteriorates
Non-performing loans and leases were 0.90% of net loans and leases as of Mar 31, 2020, up from 0.67% as of Mar 31, 2019. Also, non-performing assets were $137.8 million, up 42% from the prior-year quarter.
Allowance for credit losses to net loans and leases was 1.53% as of Mar 31, 2020, up from the year-ago quarter’s 0.89%. Also, in the first quarter, the company recorded $46 million provision for credit losses against $0.5 million provisions reported in the year-ago quarter.
As of Mar 31, 2020, tier I capital and tier I leverage capital were 11.11% and 8.85% compared with 10.75% and 9.03%, respectively, at the end of the prior-year quarter. Also, the ratio of tangible shareholders' equity to tangible assets shrunk 41 bps to 8.82%.
Also, ratio of its total shareholders' equity to total assets was 12.75% at the end of the March-end quarter, up from 12.16% as of Mar 31, 2019.
During the reported quarter, the company repurchased 3.3 million common shares at a weighted average price of $26.42 per share.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -23.92% due to these changes.
At this time, BancorpSouth has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise BancorpSouth has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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