It has been about a month since the last earnings report for Comerica Incorporated (CMA). Shares have added about 7.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Comerica 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 catalysts.
Comerica Q4 Earnings Miss Estimates on Lower NII, Fee Income Rises Y/Y
Comerica reported fourth-quarter 2024 adjusted earnings per share of $1.2, missing the Zacks Consensus Estimate of $1.25. In the prior-year quarter, the company reported an EPS of $1.46.
For 2024, adjusted EPS was $5.39, which beat the Zacks Consensus Estimate of $5.38. This compares unfavorably with $7.75 reported in the year-ago quarter.
Results were negatively impacted due to a fall in net interest income (NII) and a weak asset quality. However, a rise in deposit balance, solid fee income growth and a strong capital position offered support.
Net income attributable to common shareholders (GAAP basis) was $163 million, which increased significantly from $27 million reported in the year-ago quarter.
For 2024, the company reported net income attributable to common shareholders (GAAP basis) of $671 million, which decreased 21.4% year over year.
CMA's Quarterly Revenues Decline, Expenses Fall
Total quarterly revenues were $825 million, up 5.5% year over year. However, the top line missed the consensus estimate of $834.6 million.
Full-year revenues were $3.24 billion, which decreased 9.7% year over year. The top line missed the Zacks Consensus Estimate of $3.28 billion.
Quarterly NII fell 1.5% on a year-over-year basis to $575 million. The net interest margin increased 15 basis points year over year to 3.06%.
Total non-interest income was $250 million, up 26.3% on a year-over-year basis. The increase was primarily due to a rise in service charges on deposit accounts, capital markets income, brokerage fees, commercial lending fees and risk management hedging income.
Non-interest expenses totaled $587 million, down 18.2% year over year. The decline was primarily due to a fall in salaries and benefits expenses and FDIC insurance expense.
The efficiency ratio was 69.51% compared with the prior-year quarter’s 91.86%. A fall in this ratio indicates increased profitability.
CMA’s Loans Stable, Deposits Rise
As of Dec. 31, 2024, total loans remained flat on a sequential basis to $50.5 billion. Total deposits increased 1.2% from the previous quarter to $63.8 billion.
CMA's Credit Quality Deteriorates
The company recorded a provision for credit loss of $21 million in the fourth quarter, which increased 75% year over year.
The allowance for credit losses was $725 million, which remained flat year over year.
Total non-performing assets surged 73% year over year to $308 million.
Further, the allowance for credit losses to total loans ratio was 1.44% as of Dec. 31, 2024, up from 1.4% as of Dec. 31, 2023. Also, the company recorded net charge-offs of $16 million, which rose 20% year over year.
CMA's Capital Position Improves
Total capital ratio was 14.22%, up from 13.52% reported in the year-ago quarter.
The Common Equity Tier 1 capital ratio was 11.89%, up from 11.09% in the prior-year quarter.
Further, as of Dec. 31, 2024, CMA's tangible common equity ratio was 7%, up from 6.3% in the prior-year quarter.
CMA’s Capital Distribution Activities
The company repurchased $100 million of common stock under the share repurchase program.
Outlook
1Q25
NII is projected to decline 1-2% from the $575 million recorded in the prior quarter.
Non-interest income is likely to increase 6-7% from $250 million in the fourth quarter of 2024.
Non-interest expenses are projected to increase 2% from the $587 million reported in the fourth quarter of 2024 due to seasonally higher compensation expenses and lower gains on the sale of real estate.
Management anticipates average deposits to decline 3% or 2% from the average deposits of $63.8 billion recorded in the fourth quarter of 2024.
Average loans are expected to be flat with the fourth quarter 2024 reported figure of $50.5 billion.
2025
NII is anticipated to increase 6-7% from the 2024 reported figure.
Management anticipates non-interest income to increase 4% year over year.
Non-interest expenses are likely to rise 3% from that reported in 2024.
Management expects average loans between flat and a 1% rise from the 2024 actual.
Management foresees average deposits to decline 2-3% from that reported in 2024.
Management anticipates net charge-offs (NCOs) to remain below the target of 20-40 basis points.
The CET1 ratio is forecast to be more than 10%.
The tax rate is expected to be 23%, excluding discrete items.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
The consensus estimate has shifted -5.38% due to these changes.
VGM Scores
Currently, Comerica has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Comerica has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Comerica belongs to the Zacks Banks - Major Regional industry. Another stock from the same industry, The Bank of New York Mellon Corporation (BK), has gained 2.9% over the past month. More than a month has passed since the company reported results for the quarter ended December 2024.
The Bank of New York Mellon reported revenues of $4.85 billion in the last reported quarter, representing a year-over-year change of +12.4%. EPS of $1.72 for the same period compares with $1.28 a year ago.
The Bank of New York Mellon is expected to post earnings of $1.50 per share for the current quarter, representing a year-over-year change of +16.3%. Over the last 30 days, the Zacks Consensus Estimate has changed +1%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for The Bank of New York Mellon. Also, the stock has a VGM Score of D.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
