About a month has gone by since the last earnings report for Washington Federal, Inc.WAFD . Shares have lost about 1.5% in the past month, outperforming the market.
Will the recent negative trend continue leading up to its next earnings release, or is WAFD 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.
Washington Federal Q1 Earnings Beat as Revenues Rise
Washington Federal's first-quarter fiscal 2018 (ended Dec 31) earnings of 59 cents per share in the quarter beat the Zacks Consensus Estimate of 51 cents. The number also reflects year-over-year growth of 28.3%.
Results were mainly driven by increase in net interest revenues and non-interest income. Also, rise in loan and deposit balances, and improving asset quality acted as tailwinds. However, higher operating expenses were an undermining factor.
Results in the reported quarter included one-time charges of $9 million and $8.6 million related to the tax act and termination of its loss share agreements with the FDIC, respectively. After considering one-time charges, Washington Federal's net income came in at $51.7 million, up 25.3% from the prior-year quarter.
Higher Revenues Offset by Rise in Expenses
Net revenues were $122.5 million, up 6.5% from the year-ago quarter. However, the figure lagged the Zacks Consensus Estimate of $125 million.
Revenues in the reported quarter included above-mentioned one-time charge related to the termination of loss sharing agreement. After excluding the same, adjusted net revenues were $131.1 million, up 13.9% year over year.
Net interest income was $115.7 million, up 12.2% from the year-ago quarter. Also, net interest margin increased 24 basis points year over year to 3.26%.
Adjusted other income jumped 29% year over year to $15.345 million. The rise was mainly driven by increase in deposit fee income and other income.
Operating expenses rose 14% from the prior-year quarter to $61.9 million. The rise was largely due to higher compensation and benefit, information technology costs and other expenses.
The company's adjusted efficiency ratio came in at 47.25%, up marginally from 47.23% a year ago. A rise in efficiency ratio indicates deterioration in profitability.
At the end of the reported quarter, return on average common equity was 10.25%, up from 8.31% at the end of the prior-year quarter. Return on average assets was 1.35% compared with 1.11% in the year-ago quarter.
Loans & Deposits Rise
As of Dec 31, 2017, net loans receivables were $11.1 billion, up 2.1% sequentially. Also, customer deposit accounts were $11 billion, up 1.5% from the prior quarter.
Improvement in Credit Quality
As of Dec 31, 2017, the ratio of non-performing assets to total assets was 0.41% compared with 0.56% as of Dec 31, 2016. Provision for loan losses was nil during the reported quarter as net recoveries and improvement in credit conditions were offset by strong growth in the loan portfolio.
Further, the allowance for loan losses and reserve for unfunded commitments were 1.08% of gross loans outstanding, marginally up from the Sep 30, 2017 level.
During the reported quarter, Washington Federal repurchased 1.1 million shares at an average price of $33.98 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter. While looking back an additional 30 days, we can see upward momentum.
Washington Federal, Inc. Price and Consensus
At this time, WAFD has a subpar Growth Score of D, however its Momentum is doing a bit better with a C. Charting a somewhat similar path, the stock was also 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum based on our styles scores.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Interestingly, WAFD has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.