Why Is Commerce (CBSH) Down 3.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Commerce Bancshares (CBSH). Shares have lost about 3.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Commerce 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 drivers.
Commerce Bancshares Q2 Earnings Beat on Lower Provisions
Commerce Bancshares’ second-quarter 2023 earnings per share of $1.02 surpassed the Zacks Consensus Estimate of 93 cents. The bottom line also increased 10.9% from the prior-year quarter.
Results benefited from a decline in provisions. This, along with an increase in NII on a rise in loan balance and higher interest rates, as well as higher non-interest income, acted as tailwinds. On the other hand, a rise in expenses was a headwind.
Net income attributable to common shareholders was $127.8 million, up 10.4% year over year. Our estimate for the metric was $112 million.
Revenues & Expenses Rise
Total revenues were $397.1 million, up 6.8% year over year. The top line beat the Zacks Consensus Estimate of $387.2 million.
NII was $249.5 million, up 7.4% year over year. Our estimate for NII was $248.5 million.
Net yield on interest-earning assets expanded 33 basis points (bps) to 3.12%.
Non-interest income came in at $147.6 million, increasing 5.9%. The upswing was largely driven by an increase in bank card transaction fees and other fees. Our estimate for non-interest income was $139.4 million.
Non-interest expenses increased 6.6% to $227.6 million. The rise was mainly due to higher salaries and employee benefit expenses, data processing and software expense, and other expenses. We had projected expenses to be $226.6 million.
The efficiency ratio decreased to 57.22% from 57.29% in the year-ago quarter. A decrease in the efficiency ratio indicates an improvement in profitability.
As of Jun 30, 2023, total loans were $16.96 billion, up 2.5% from the prior quarter. Total deposits as of the same date were $25.87 billion, up 4.8%.
Credit Quality: A Mixed Bag
Provision for credit losses was $6.5 million, which decreased 9.6% from the prior-year quarter. Non-accrual loans to total loans were 0.04%, which decreased 1 bp from the prior-year number.
The ratio of annualized net loan charge-offs to total average loans was 0.16%, up from 0.10% in the year-earlier quarter. Allowance for credit losses on loans to total loans was 0.94%, increasing 6 bps.
Capital & Profitability Ratios Solid
As of Jun 30, 2023, the Tier I leverage ratio was 10.46%, up from 9.45% in the year-ago quarter. Tangible common equity to tangible assets ratio increased to 7.70% from the prior-year quarter’s 7.56%.
At the end of the second quarter of 2023, the return on total average assets was 1.56%, up from the year-ago period’s 1.36%. Return on average common equity was 18.81%, up from 16.29% in the prior-year quarter.
Share Repurchase Update
During the reported quarter, the company did not repurchase any shares.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, Commerce has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Following the exact same course, 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 aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Commerce has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Commerce Bancshares, Inc. (CBSH) : Free Stock Analysis Report
