1Q Core Miss (ex-Tax, Non-core Gain) on Higher Expense; Despite + Backlog Momentum, Expect Shares to U/P. EVR reported 1Q EPS of $1.66, but adjusted for lower tax rate ($0.27) and Investment Gains relating to deferred comp (~$0.05, we est.), core EPS came in closer to $1.34, below our $1.39 and cons. of $1.56. Versus our estimate, stronger IB fees (+$0.07) led by robust underwriting results, better comp leverage (+$0.04), and lower minority interest / sharecount (+$0.02) were more than offset by higher non-comp expense (-$0.18). While revenues exceeded our forecast, they did miss cons. excluding the investment gain. See pg. 2 for our detailed earnings variance. Bottom Line: Despite positive management commentary citing growing backlog, this quarter’s result was more indicative of the Evercore of old given its spotty 1Q track record (missing cons. two-thirds of the time – see Ex. 2). Our sense is that the earnings bar had been raised somewhat given strong three-month performance (+16% vs. S&P Fins. +7%), and while we could see some selling pressure this morning, we expect long-term holders to stay the course given continued strong backlog momentum (+4% YoY, vs. independent peers -30%) and an undemanding valuation of 11.9x (vs. 1Y avg. of 12.3x and 3Y avg. of 3.7x
Search Coverage List, Models & Reports
Search Results1-10 out of 146
1Q19 Earnings Recap: NTRS the Clear Standout but Still Cautious on the Trusts. STT and NTRS closed out Trust Bank earnings today, with both firms reporting headline EPS beats vs. cons. However, core trends and messaging differed materially, with STT disappointing on guidance for both fees and NII; whereas NTRS gave more constructive guidance on both revenues and expenses. The divergence in the day’s share performance (NTRS +4%, STT -4% vs. S&P Fins. +1%) makes sense in the context of our 2019E / 2020E estimate revisions (NTRS +6-7%, STT -2%); based on our updated forecasts, NTRS is the lone Trust bank that will not post earnings declines (YoY), reinforcing our view that “flat is the new up” for the Trusts. While NTRS surprised positively vs. peers, looking across a broad swathe of Regional and Money Center banks, results were less impressive, reinforcing our preference for the Money Centers (BAC, C, JPM) where both revenue and efficiency trends, as well as balance sheet metrics, are tracking better. For a detailed look at our Income and Balance Sheet comparative, please review pgs. 7-9.
AMTD reported FY2Q of $0.93 vs. our estimate of $0.91 and cons. of $0.92, with the beat vs. our estimate driven by higher NII and commissions, as well as lower expense, partially offset by lower BDA fees. We note revenues did miss consensus expectations (see pg. 2 for full variance). The firm also provided updated guidance on items including commission per trade (CPT) and advertising spend. We see downside risk to 2H19 cons. given lower BDA balances and lower CPT, partially offset by lower marketing spend and lower sharecount. After digesting management remarks, we also changed our estimates to reflect updated guidance / flow-through from FY2Q results, with our estimates largely unchanged (see summary of changes below). We may revisit our numbers following tomorrow’s conference call.
NTRS reported 1Q19 EPS of $1.48; adjusting for higher severance, core EPS was $1.52, slightly ahead of our estimate and cons. of $1.47. Versus our forecast, the beat was driven primarily by stronger fees across both Custody (+$0.02) and Wealth Management (+$0.02), which also drove better efficiency (+$0.02), partially offset by weaker FX trading (-$0.01), and a slightly higher tax rate (-$0.01) See pg. 2 for detailed variance. Bottom Line: NTRS delivered solid results in a tough quarter, as fee trends were better than expected, and management did a good job of controlling expenses. Deposit trends were also (relatively) better – while liability balances came slightly in below our forecasts (average deposits down -2%, non-interest bearing down -7%), deposit repricing trends were much better than expected (+7bps QoQ, vs. BK +13bps and STT +15bps). We would expect shares to outperform given stronger results at NTRS versus Trust peers, but remain wary of NII guidance given continued deposit declines and high NII bar implied by current cons.
STT reported 1Q19 EPS (ex-items) of $1.24, in line with our $1.24, and ahead of cons. of $1.19. Versus our estimate, revenues came in slightly above on higher processing fee income (+$0.01, which included the benefit of a tax-advantaged lease sale), with core efficiency (ex. restructuring and related costs) in line, partially offset by a higher provision (-$0.01). See pg. 2 for detailed variance (ex-items). Bottom Line: While STT shares have outperformed peers in recent weeks (MTD +460bps ahead of NTRS, +1060bps ahead of BK), these results demonstrated greater EPS resiliency. Following a string of disappointing prints at STT the past few quarters, these results are more encouraging, and should drive modest outperformance. The lone area of concern we will be looking out for is NII / deposit guidance as avg. noninterest-bearing deposits declined -12% QoQ (total deposits -2%) which could negatively impact NII guidance. We look forward to additional color on the call this morning (04/23/19).
This week our WR Banks & Brokers Index was up +2% WoW, outpacing the S&P 500 by 100bps but lagging the S&P Fins. (+3%). After a week packed with earnings, the clear winners, namely JPM (+8%), Citi (+6%), and MS (+6%), were firms that either absolutely crushed earnings or outlined a clear path to delivering meaningful long-term shareholder value. BK (-5%) and WFC (-2%) suffered from lackluster core results and disappointing outlook commentary, with NTRS (-3%) rounding out the bottom three as shares traded in sympathy following BK’s tough 1Q print. Looking at YTD trends, no change to our top three performers in SF (+43%), Citi (+34%) and EVR (+31%), but there was a slight shakeup among the bottom three, with BK (+3%) joining fellow laggards WFC (+3%) and LAZ (+2%).
ETFC reported 1Q19 EPS of $1.09 ($1.01 ex items) after the close, vs. our estimate of $0.96 and consensus of $0.93. Beat was primarily driven by better fee income and lower expenses. Commentary on the call was very encouraging as mgmt. reiterated operating margin target of 50% in 2020 (which we believe is conservative) and cited good momentum in Corporate Services which continues to contribute meaningfully to deposit / cash growth. Updated 2019 NIM guide (315-320bps) was a touch lower vs. prior guidance of 320bps but this was more than offset by better earning-asset growth which we expect to continue. Overall guidance supports upward revisions to cons.; shares are up ~3% after-market (as of this writing) and we expect strong follow-through tomorrow. With shares trading at a discount to high-ROE bank peers despite much stronger earnings growth / lower credit risk at ETFC, risk / reward remains very favorable in our view. Updated PT of $63 supports 26% upside to shares; reiterate Outperform.
BK reported a 1Q19 miss this morning, and weaker-than-expected results, along with disappointing guidance on the conference call sent shares tumbling (closing down -9.5% vs. S&P Fin. flat). 1Q19 results reinforced multiple tenets of our negative thesis for the Trust Banks, including fee income pressures, persistent declines in deposits / NII (which we have highlighted since our Sep. initiation), and limited expense flexibility, with key trends lagging peers (Ex. 5-13). In addition to 1Q NII miss, management guided to 2Q NII down 3-5% QoQ; looking beyond 2Q, if deposit costs continue to increase (given mgmt. commentary that competition continues to intensify) and asset yields are unchanged, with limited growth in balances, we believe NII declines should be sustained through at least the remainder of 2019. Even if we assume greater expense flexibility and continued sharecount declines / robust capital return, pressure on both NII and fee income suggests cons. EPS is still 6-7% too high. Weaker revenue momentum should also impact the multiple which, relative to STT / NTRS, has climbed to near post-crisis peak levels (Ex. 3-4). Updated PT of $46 implies -5% downside shares; maintain Underperform as BK remains our preferred short among the Trusts.
Impressive 1Q Revenue Beat in Choppy Tape; Shares, Cons. Heading Higher. MS reported 1Q19 EPS of $1.39, well above our est. of $1.19 and cons. of $1.17; adjusting for a lower tax rate, core EPS was ~$1.28. Versus our estimate, the revenue beat (+$0.08) was broad-based, with the biggest contributors FICC (+$0.04), Wealth Management fee income (+$0.03), and Investment Mgmt. fees (+$0.03), which more than offset modestly weaker Equities (-$0.01) and IB (-$0.01). See pg. 2 for our earnings variance sheet. Bottom-Line: MS shares have outperformed the broader market following results at peers (~240bps outperformance since earnings season kicked off on Apr. 11th), but we expect continued follow-through as results showcased broad-based strength in a difficult revenue environment, with cons. likely heading higher as well. Valuation also looks very compelling with the firm delivering core ROTCE of ~14% (vs. <1.3x TBV). Maintain Outperform.
1Q Miss as NII Pressures Continue; Shares, Cons. Heading Lower. BK reported 1Q19 EPS of $0.94, below our $0.98 and cons. of $0.96. Adjusting for a lower tax rate ($1.01), core EPS was closer to $0.93. Versus our estimate, the core miss was driven by weaker NII (-$0.01), lower management fees (-$0.01), and higher efficiency ratio (-$0.02), though absolute dollars of expense came in below our est. Bottom Line: These results reinforce top-line challenges for the Trusts with both NII and fee income down high-single-digit % YoY, with NII headwinds exacerbated by non-interest-bearing deposit declines (-7% QoQ, -23% YoY). This has been a key driver of our cautious thesis on the group, and even with the better market backdrop in 1Q (which should help 2Q19 results), we struggle to see a path to achieving management’s goal of delivering EPS growth in 2019 (adjusted basis), with these results likely to weigh on shares / prompt negative revisions.
- 1 of 15
- next →