It has been about a month since the last earnings report for BancorpSouth (BXS). Shares have lost about 6.3% 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 its most recent earnings report in order to get a better handle on the important catalysts.
BancorpSouth Q2 Earnings Meet Estimates, Revenues Rise Y/Y
BancorpSouth reported second-quarter 2019 net operating earnings of 61 cents per share, which came in line with the Zacks Consensus Estimate. The bottom line increased 8.9% from the prior-year quarter.
Results were affected by lower non-interest income and higher expenses. However, an improvement in net interest revenues, net interest margin (NIM) and lower provisions were tailwinds.
After considering certain non-recurring items, the company’s net income for the second quarter amounted to $53.1 million compared with $54 million in the year-ago quarter.
Revenues Climb, Expenses Rise, Loans Improve
Net revenues for the reported quarter increased 5.5% year over year to $226.3 million. However, the top line missed the Zacks Consensus Estimate of $235 million.
Net interest revenues for the quarter came in at $160 million, up 12.6% year over year. Fully-taxable equivalent NIM was 3.87%, expanding 16 basis points (bps).
Non-interest revenues decreased 8.5% year over year to $66.3 million. However, the figure included a negative mortgage servicing rights valuation adjustment of $8.8 million. The downside mainly resulted from lower mortgage banking and credit card fees.
Non-interest expenses came in at $157.7 million, up 8.6% from the year-ago quarter. The rise stemmed from the impact of higher salaries and employee benefits, net occupancy, equipment and deposit insurance assessments.
As of Jun 30, 2019, total deposits were $15.1 billion, up 3% sequentially while loans and leases, net of unearned income, increased 4.5% to $13.7 billion.
Credit Quality: A Mixed Bag
Non-performing loans and leases were 0.66% of net loans and leases as of Jun 30, 2019, up from 0.59% as of Jun 30, 2018. However, annualized net charge-offs, as a percentage of average loans and leases, decreased to 0.04% from 0.07% recorded on Jun 30, 2018. Also, allowance for credit losses to net loans and leases was 0.85%, down from 0.97% in the year-ago quarter.
Non-performing assets were nearly $96 million, up from the prior-year quarter’s $81.2 million. However, the company recorded provision for credit losses of $0.5 million compared with the $2.5 million in the year-ago quarter.
Strong Capital Ratios
As of Jun 30, 2019, tier I capital and tier I leverage capital was 10.52% and 8.96%, down from 11.42% and 9.38%, respectively, at the end of the prior-year quarter.
Ratio of its total shareholders' equity to total assets was 12.29% at the end of the June-ended quarter, up from 12.03% as of Jun 30, 2018. However, the ratio of tangible shareholders' equity to tangible assets shrunk 29 bps to 8.41%.
During the reported quarter, the company repurchased 0.61 million common shares at a weighted average price of $28.21 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
At this time, BancorpSouth has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, BancorpSouth has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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