Category: SNV

SNV – Synovus (SNV) Up 0.9% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Synovus Financial (SNV Free Report) . Shares have added about 0.9% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Synovus 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.

Synovus Q2 Earnings Beat Estimates, Provisions Fall

Synovus reported second-quarter 2021 adjusted earnings of $1.20 per share, which handily beat the Zacks Consensus Estimate of $1.03 per share, aided by solid mortgage banking income. Also, the bottom line compares favorably with the earnings of 23 cents per share recorded in the year-ago quarter.

Results were driven by rising NII, lower expenses and reversal of provisions. Moreover, solid capital position stoked organic growth. However, lower non-interest income and loans were undermining factors.

Including certain non-recurring items, net income available to common shareholders came in at $177.9 million or $1.19 per share compared with the $84.2 million or 57 cents recorded in the prior-year quarter.

Revenues Fall on Lower Non-Interest Income, Expenses Down

Adjusted revenues (fully tax-equivalent basis) in the second quarter came in at $488.95 million, down 11.1% from the prior-year quarter. Yet, the top line outpaced the Zacks Consensus Estimate by 0.98%.

NII inched up 1.4% year over year to $381.9 million. However, net interest margin shrunk 11 basis points (bps) to 3.02%.

Non-interest income plunged 38% on a year-over-year basis to $107.1 million. Fall in mortgage banking, income from bank-owned life insurance, capital markets income and other non-interest revenues led to this downside.

Non-interest expenses were $270.5 million, down 5% year over year. This upside mainly resulted from lower professional fees, FDIC insurance and other regulatory fees and Other operating expenses.

Adjusted tangible efficiency ratio came in at 54.41% compared with the 57.71% reported in the year-earlier quarter. A fall in ratio indicates an improvement in profitability.

Total deposits were $47.2 billion, down 0.4% sequentially. Also, total loans fell 4.2% sequentially to $38.2 billion.

Credit Quality: A Mixed Bag

Synovus’ credit metrics witnessed a mixed performance during the June-end quarter.

Non-performing loans rose 9% year over year to $161 million. Net charge-offs increased 10% to $26.5 million. The annualized net charge-off ratio was 0.28% compared with the year-ago quarter’s 0.24%. Total non-performing assets amounted to $177.8 million, underlining a marginal year-over-year jump.

Reversal of provision for credit losses of $24.6 million was recorded in the second quarter against provision expense of $141.9 in the prior-year quarter. Non-performing loan ratio came in at 0.46%, shrinking 4 bps sequentially.

Robust Capital & Profitability Ratio

Tier 1 capital ratio and total risk-based capital ratio were 10.99% and 13.25%, respectively, compared with 10.15% and 12.70% as of Jun 30, 2020.

Moreover, as of Jun 30, 2021, Common Equity Tier 1 Ratio (fully phased-in) was 9.75% compared with the 8.90% witnessed in the year-ago quarter. Tier 1 Leverage ratio was 8.72% compared with the 8.38% recorded in the year-earlier period.

Return on average assets was 1.36% compared with the prior-year quarter’s 0.71%. Return on average common equity was 15.40%, up from the 7.48%.

2021 Outlook

Excluding all paycheck protection program balance changes and third-party consumer loan, the company expects period-end loan growth at the low end of 2-4% for 2021.

Overall, total adjusted revenues are expected to decline 1% and increase 1% in 2021. It expects adjusted non-interest expenses decline between 1% and 2% for 2021.

CET1 ratio of less or equal 9.5% is expected for 2021. The company expects an effective tax rate of 22% to 24%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 7.06% due to these changes.

VGM Scores

Currently, Synovus 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 D. If you aren’t focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Synovus has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

SNV – Synovus Financial (SNV) Q1 Earnings and Revenues Top Estimates

Synovus Financial (SNV Free Report) came out with quarterly earnings of $1.21 per share, beating the Zacks Consensus Estimate of $0.93 per share. This compares to earnings of $0.21 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 30.11%. A quarter ago, it was expected that this holding company for Synovus Bank would post earnings of $0.82 per share when it actually produced earnings of $1.08, delivering a surprise of 31.71%.

Over the last four quarters, the company has surpassed consensus EPS estimates four times.

Synovus, which belongs to the Zacks Banks – Southeast industry, posted revenues of $484.81 million for the quarter ended March 2021, surpassing the Zacks Consensus Estimate by 0.66%. This compares to year-ago revenues of $477.12 million. The company has topped consensus revenue estimates four times over the last four quarters.

The sustainability of the stock’s immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management’s commentary on the earnings call.

Synovus shares have added about 45.4% since the beginning of the year versus the S&P 500’s gain of 11.4%.

What’s Next for Synovus?

While Synovus has outperformed the market so far this year, the question that comes to investors’ minds is: what’s next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company’s earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Synovus was favorable. While the magnitude and direction of estimate revisions could change following the company’s just-released earnings report, the current status translates into a Zacks Rank #2 (Buy) for the stock. So, the shares are expected to outperform the market in the near future. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.91 on $479.22 million in revenues for the coming quarter and $3.68 on $1.91 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Banks – Southeast is currently in the top 6% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.