It has been about a month since the last earnings report for Commerce Bancshares (CBSH). Shares have lost about 1.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is 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 the most recent earnings report in order to get a better handle on the important catalysts.
Commerce Bancshares' Q4 Earnings & Revenues Beat, Provisions Soar
Commerce Bancshares reported fourth-quarter 2024 earnings per share of $1.01, which surpassed the Zacks Consensus Estimate of 94 cents. The bottom line also jumped 27.8% from the prior-year quarter.
Results benefited from a rise in NII and non-interest income. Also, stable adjusted expenses posed a tailwind. However, a substantial jump in provisions hurt the results to some extent.
Net income attributable to common shareholders was $136.1 million, up 24.6% year over year. Our estimate for the metric was $117.6 million.
For 2024, earnings were $3.87 per share, lagging the consensus estimate of $3.91 but growing 11.8% year over year. Net income attributable to common shareholders was $526.3 million, up 10.3%.
Revenues Improve, Adjusted Expenses Stable
Total revenues in the quarter were $422.1 million, up 7.3% year over year. The top line outpaced the Zacks Consensus Estimate of $415.1 million.
For 2024, total revenues grew 5.4% from the prior year to $1.66 billion. The top line beat the consensus estimate of $1.65 billion.
NII was $266.6 million, rising 7.3% from the year-ago quarter. Our estimate for NII was $257.2 million.
Net yield on interest-earning assets expanded 32 basis points (bps) to 3.49%. Our estimate for the metric was 3.50%.
Non-interest income was $155.4 million, up 7.3%. The rise was driven by higher trust fees, capital market fees and consumer brokerage services. Our estimate for non-interest income was $156.8 million.
Non-interest expenses decreased 6.6% to $235.7 million. The absence of the FDIC special assessment was the primary reason for the decline. Excluding this charge, expenses were relatively stable. We expected expenses of $255.5 million.
Net investment securities gain was $0.98 million compared with $7.6 million in the prior-year quarter.
The efficiency ratio declined to 55.77% from 63.80% in the year-ago quarter. A fall in the efficiency ratio indicates an improvement in profitability.
As of Dec. 31, 2024, net loans were $17.06 billion, up almost 1% from the prior quarter end. Total deposits were $25.29 billion, which rose marginally. Our estimates for net loans and total deposits were $17.61 billion and $25.79 billion, respectively.
Asset Quality Worsens
Provision for credit losses was $13.6 million, which soared substantially from the prior-year quarter’s $5.9 million. Our estimate for the metric was $9.3 billion.
Allowance for credit losses on loans to total loans was 0.95%, increasing 1 bps year over year. The ratio of annualized net loan charge-offs to total average loans was 0.25%, up from 0.19%.
Further, non-accrual loans to total loans were 0.11%, up 7 bps from the prior-year quarter.
Capital Ratios Improve, Profitability Ratios Mixed
As of Dec. 31, 2024, the Tier I leverage ratio was 12.26%, up from 11.25% in the year-ago quarter. Tangible common equity to tangible assets ratio increased to 9.92% from the prior-year quarter’s 8.85%.
At the end of the fourth quarter, the return on total average assets was 1.73%, up from the year-ago period’s 1.38%. Return on average equity was 15.97% compared with 16.48% in the prior-year quarter.
Share Repurchase Update
In the reported quarter, the company repurchased 0.68 million shares at an average price of $67.88.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 5.47% due to these changes.
VGM Scores
At this time, Commerce 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Commerce has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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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.
