BancorpSouth (BXS) Down 5.9% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for BancorpSouth (BXS). Shares have lost about 5.9% 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's Q4 Earnings Beat Estimates on High Revenues

BancorpSouth Bank delivered positive earnings surprise of 8.3% in fourth-quarter 2019 on higher interest income. Net operating earnings of 65 cents per share beat the Zacks Consensus Estimate of 60 cents. Also, the bottom line increased 14% from the prior-year quarter.

Higher net revenues aided by rise in interest income and non-interest revenues were the driving factors. Also, nil provisions during the quarter came as a tailwind. However, mounting expenses was a major drag.

After considering certain non-recurring items, the company’s net income for the fourth quarter amounted to $65.8 million or 63 cents per share, up from the $47.1 million or 47 cents reported in the year-ago quarter.

For full-year 2019, BancorpSouth reported net income of $234.3 million or $2.30 per share compared with $221.3 million or $2.23 in prior-year.

Revenues & Deposits Climb, Expenses Rise

Net revenues for the reported quarter increased 15.8% year over year to $245.5 million. Also, the top-line figure outpaced the Zacks Consensus Estimate of $242.6 million.

For 2019, the company reported net revenues of $930.6 million, up 8.6% from 2018. The reported figure surpassed the consensus estimate of $929.3 million.

Net interest revenues for the quarter came in at $170.8 million, up 11.7% year over year. Fully-taxable equivalent NIM was 3.76%, contracting 4 basis points (bps).

Non-interest revenues increased 26.5% year over year to $74.7 million. However, the figure included a positive mortgage servicing rights valuation adjustment of $3.2 million. This upswing resulted from rise in all the components except insurance commissions and credit card, debit card and merchant fees.

Non-interest expenses were $162.4 million, up 6.6% from the year-ago quarter. The upside stemmed from the impact of higher salaries and employee benefits, net occupancy and equipment expenses.

As of Dec 31, 2019, total deposits were $16.4 billion, up 2.4% sequentially, while loans and leases, net of unearned income, declined marginally to $14.1 billion.

Credit Quality: A Mixed Bag

Non-performing loans and leases were 0.79% of net loans and leases as of Dec 31, 2019, up from 0.67% as of Dec 31, 2018. Also, non-performing assets came in at $118.3 million, up 11.5% from the prior-year quarter.

However, allowance for credit losses to net loans and leases was 0.85% as of Dec 31, 2019, down from the year-ago quarter’s 0.92%. Moreover, in the fourth quarter, the company recorded nil provision for credit losses against $1 million provisions reported in the year-ago quarter.

Strong Capital Position

As of Dec 31, 2019, tier I capital and tier I leverage capital was 11.6% and 9.69%, up from 10.84% and 9.06%, respectively, at the end of the prior-year quarter. Also, the ratio of tangible shareholders' equity to tangible assets shrunk 49 bps to 8.92%.

Also, ratio of its total shareholders' equity to total assets was 12.75% at the end of the December-ended quarter, up from 12.25% as of Dec 31, 2018.

Share Repurchases

During the reported quarter, the company repurchased 0.29 million common shares at a weighted average price of $32.46 per share. In full-year 2019, BancorpSouth repurchased 2.5 million common shares at a weighted average price of $28.20 per share.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, BancorpSouth has a poor Growth Score of F, however its Momentum Score is doing a lot 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 C. 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, 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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