Texas Capital Bancshares Inc : Rbc Raises Target Price To $90 From $83

Have you been paying attention to shares of BOK Financial (BOKF)? Shares have been on the move with the stock up 13.6% over the past month. The stock hit a new 52-week high of $119.52 in the previous session. BOK Financial has gained 38.8% since the start of the year compared to the 24.1% move for the Zacks Finance sector and the 31.2% return for the Zacks Banks - Southwest industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 21, 2024, BOK Financial reported EPS of $2.18 versus consensus estimate of $2 while it beat the consensus revenue estimate by 1.35%.

For the current fiscal year, BOK Financial is expected to post earnings of $8.07 per share on $2.03 billion in revenues. This represents a -5.5% change in EPS on a -1.73% change in revenues. For the next fiscal year, the company is expected to earn $8.51 per share on $2.17 billion in revenues. This represents a year-over-year change of 5.5% and 7.01%, respectively.

Valuation Metrics

BOK Financial may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

BOK Financial has a Value Score of A. The stock's Growth and Momentum Scores are D and B, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 14.7X current fiscal year EPS estimates, which is not in-line with the peer industry average of 16X. On a trailing cash flow basis, the stock currently trades at 11.9X versus its peer group's average of 11X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, BOK Financial currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if BOK Financial passes the test. Thus, it seems as though BOK Financial shares could have potential in the weeks and months to come.

How Does BOKF Stack Up to the Competition?

Shares of BOKF have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Texas Capital Bancshares, Inc. (TCBI). TCBI has a Zacks Rank of # 1 (Strong Buy) and a Value Score of B, a Growth Score of C, and a Momentum Score of B.

Earnings were strong last quarter. Texas Capital Bancshares, Inc. beat our consensus estimate by 67.01%, and for the current fiscal year, TCBI is expected to post earnings of $5.78 per share on revenue of $994.18 million.

Shares of Texas Capital Bancshares, Inc. have gained 15.1% over the past month, and currently trade at a forward P/E of 20.61X and a P/CF of 18.02X.

The Banks - Southwest industry is in the top 12% of all the industries we have in our universe, so it looks like there are some nice tailwinds for BOKF and TCBI, even beyond their own solid fundamental situation.

Zacks Investment Research

UMB Financial Corp. UMBF reported third-quarter 2024 operating earnings per share of $2.25, which beat the Zacks Consensus Estimate of $2.16. Also, the bottom line compared favorably with the $2.02 earned in the year-ago quarter.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Results benefited from higher net interest income (NII) and fee income. Rising loan and deposit balances were other positives. However, higher expenses, increased provisions and worsening credit quality acted as spoilsport.

The results included a reduction of $31.7 million related to the pre-tax FDIC special assessment expense. After considering these charges, the GAAP net income for UMBF was $109.6 million for the third quarter, up 13.6% year over year.

UMB Financial’s Quarterly Revenues & Costs Rise

Quarterly revenues were $406.1 million, up 14.2% year over year. Also, the top line beat the Zacks Consensus Estimate of $398.8 million.

NII on an FTE basis was $254 million, which increased 11% from the prior-year quarter. On an FTE basis, Net interest margin (NIM) was 2.46%, up from 2.43% reported in the prior-year quarter.

Non-interest income was $158.7 million, up 19.1% year over year. The rise was primarily driven by an increase in almost all components of fee income, except for service charges on deposit accounts.

Non-interest expenses were $252.5 million, up 9.1% year over year. The rise was primarily driven by higher salaries and employee benefits, processing fees expense due to increased software subscription costs and legal and consulting expense related to the announced acquisition of Heartland Financial USA, Inc. These were partially offset by a decrease of $1.5 million in regulatory fees expense and a decline of $1.9 million in operational losses, recorded in other expense. The operating non-interest expense was $251.5 million.

The efficiency ratio increased to 61.69%, down from the prior-year quarter’s 64.51%. A decline in the efficiency ratio indicates an increase in profitability.

UMB Financial’s Loans & Deposits Increase

As of Sept. 30, 2024, average loans and leases were $24.4 billion, up 2.4% sequentially. Also, average deposits increased 2.8% to $35.3 billion.

UMB Financial’s Credit Quality Deteriorates

The ratio of net charge-offs to average loans was 0.14% in the reported quarter, up from 0.08% in the prior-year quarter.

Also, total non-accrual and restructured loans were $19.3 million, up 13.2% year over year.

The provision for credit losses was $18 million for the third quarter of 2024, up significantly from $5 million reported in the prior-year quarter.

UMB Financial’s Capital Ratios Improve

As of Sept. 30, 2024, the Tier 1 risk-based capital ratio was 11.22%, which rose from 10.77% as of Sept. 30, 2023. The Tier 1 leverage ratio was 8.58%, which increased from 8.55% as of Sept. 30, 2023. The total risk-based capital ratio was 13.14%, which grew from 12.68% in the year-ago quarter.

UMB Financial’s Profitability Ratios: Mixed Bag

Return on average assets at the quarter’s end was 1.01%, which increased from the year-ago quarter’s 0.97%.

The operating return on average equity was 12.71%, down from 13.50% reported in the year-ago quarter.

Our Take on UMBF

UMB Financial benefits from revenue strength aided by rising loan and deposit balances, along with diversified fee income. However, an elevated expense base is likely to impede the bottom-line growth in the near term.

UMB Financial Corporation Price, Consensus and EPS Surprise

UMB Financial Corporation price-consensus-eps-surprise-chart | UMB Financial Corporation Quote

UMB Financial currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Bank of Hawaii Corporation BOH reported third-quarter 2024 adjusted earnings per share of 93 cents, beating the Zacks Consensus Estimate of 81 cents. The bottom line compared unfavorably with $1.17 earned in the year-ago quarter.

BOH's quarterly results benefited from an increase in deposits balance and NIM. A decline in NII, along with a drop in loans balances and higher expenses, were undermining factors. A surge in provisions was another major headwind.

Texas Capital Bancshares, Inc. TCBI reported third-quarter 2024 adjusted earnings per share of $1.62, which beat the Zacks Consensus Estimate of 97 cents. Moreover, earnings compared favorably with $1.18 reported in the year-ago quarter.

TCBI's results benefited from an increase in NII, fee income and higher loan and deposit balances. However, an increase in expenses was the undermining factor.

Zacks Investment Research

For new and old investors, taking full advantage of the stock market and investing with confidence are common goals. Zacks Premium provides lots of different ways to do both.

The popular research service can help you become a smarter, more self-assured investor, giving you access to daily updates of the Zacks Rank and Zacks Industry Rank, the Zacks #1 Rank List, Equity Research reports, and Premium stock screens.

Zacks Premium also includes the Zacks Style Scores.

What are the Zacks Style Scores?

Developed alongside the Zacks Rank, the Zacks Style Scores are a group of complementary indicators that help investors pick stocks with the best chances of beating the market over the next 30 days.

Based on their value, growth, and momentum characteristics, each stock is assigned a rating of A, B, C, D, or F. The better the score, the better chance the stock will outperform; an A is better than a B, a B is better than a C, and so on.

The Style Scores are broken down into four categories:

Value Score

Finding good stocks at good prices, and discovering which companies are trading under their true value, are what value investors like to focus on. So, the Value Style Score takes into account ratios like P/E, PEG, Price/Sales, Price/Cash Flow, and a host of other multiples to highlight the most attractive and discounted stocks.

Growth Score

Growth investors are more concerned with a stock's future prospects, and the overall financial health and strength of a company. Thus, the Growth Style Score analyzes characteristics like projected and historic earnings, sales, and cash flow to find stocks that will see sustainable growth over time.

Momentum Score

Momentum trading is all about taking advantage of upward or downward trends in a stock's price or earnings outlook, and these investors live by the saying "the trend is your friend." The Momentum Style Score can pinpoint good times to build a position in a stock, using factors like one-week price change and the monthly percentage change in earnings estimates.

VGM Score

What if you like to use all three types of investing? The VGM Score is a combination of all Style Scores, making it one of the most comprehensive indicators to use with the Zacks Rank. It rates each stock on their combined weighted styles, which helps narrow down the companies with the most attractive value, best growth forecast, and most promising momentum.

How Style Scores Work with the Zacks Rank

A proprietary stock-rating model, the Zacks Rank utilizes the power of earnings estimate revisions, or changes to a company's earnings outlook, to help investors create a successful portfolio.

#1 (Strong Buy) stocks have produced an unmatched +25.41% average annual return since 1988, which is more than double the S&P 500's performance over the same time frame. However, the Zacks Rank examines a ton of stocks, and there can be more than 200 companies with a Strong Buy rank, and another 600 with a #2 (Buy) rank, on any given day.

This totals more than 800 top-rated stocks, and it can be overwhelming to try and pick the best stocks for you and your portfolio.

That's where the Style Scores come in.

To maximize your returns, you want to buy stocks with the highest probability of success. This means picking stocks with a Zacks Rank #1 or #2 that also have Style Scores of A or B. If you find yourself looking at stocks with a #3 (Hold) rank, make sure they have Scores of A or B as well to ensure as much upside potential as possible.

Since the Scores were created to work together with the Zacks Rank, the direction of a stock's earnings estimate revisions should be a key factor when choosing which stocks to buy.

For instance, a stock with a #4 (Sell) or #5 (Strong Sell) rating, even one that boasts Scores of A and B, still has a downward-trending earnings forecast, and a much greater likelihood its share price will decline as well.

Thus, the more stocks you own with a #1 or #2 Rank and Scores of A or B, the better.

Stock to Watch: Texas Capital (TCBI)

Texas Capital Bancshares, Inc., a financial holding company, is the parent company of Texas Capital Bank, a Texas-based bank headquartered in Dallas. The company focuses on leveraging local business and community ties to the five major metropolitan areas of Texas — Dallas, Houston, Fort Worth, Austin and San Antonio.

TCBI is a #1 (Strong Buy) on the Zacks Rank, with a VGM Score of B.

Momentum investors should take note of this Finance stock. TCBI has a Momentum Style Score of A, and shares are up 8.9% over the past four weeks.

Five analysts revised their earnings estimate higher in the last 60 days for fiscal 2024, while the Zacks Consensus Estimate has increased $0.62 to $3.96 per share. TCBI also boasts an average earnings surprise of 12.4%.

With a solid Zacks Rank and top-tier Momentum and VGM Style Scores, TCBI should be on investors' short list.

Zacks Investment Research

It doesn't matter your age or experience: taking full advantage of the stock market and investing with confidence are common goals for all investors. Luckily, Zacks Premium offers several different ways to do both.

Featuring daily updates of the Zacks Rank and Zacks Industry Rank, full access to the Zacks #1 Rank List, Equity Research reports, and Premium stock screens, the research service can help you become a smarter, more self-assured investor.

Zacks Premium includes access to the Zacks Style Scores as well.

What are the Zacks Style Scores?

The Zacks Style Scores is a unique set of guidelines that rates stocks based on three popular investing types, and were developed as complementary indicators for the Zacks Rank. This combination helps investors choose securities with the highest chances of beating the market over the next 30 days.

Based on their value, growth, and momentum characteristics, each stock is assigned a rating of A, B, C, D, or F. The better the score, the better chance the stock will outperform; an A is better than a B, a B is better than a C, and so on.

The Style Scores are broken down into four categories:

Value Score

Value investors love finding good stocks at good prices, especially before the broader market catches on to a stock's true value. Utilizing ratios like P/E, PEG, Price/Sales, Price/Cash Flow, and many other multiples, the Value Style Score identifies the most attractive and most discounted stocks.

Growth Score

Growth investors are more concerned with a stock's future prospects, and the overall financial health and strength of a company. Thus, the Growth Style Score analyzes characteristics like projected and historic earnings, sales, and cash flow to find stocks that will see sustainable growth over time.

Momentum Score

Momentum investors, who live by the saying "the trend is your friend," are most interested in taking advantage of upward or downward trends in a stock's price or earnings outlook. Utilizing one-week price change and the monthly percentage change in earnings estimates, among other factors, the Momentum Style Score can help determine favorable times to buy high-momentum stocks.

VGM Score

If you want a combination of all three Style Scores, then the VGM Score will be your friend. It rates each stock on their combined weighted styles, helping you find the companies with the most attractive value, best growth forecast, and most promising momentum. It's also one of the best indicators to use with the Zacks Rank.

How Style Scores Work with the Zacks Rank

The Zacks Rank, which is a proprietary stock-rating model, employs earnings estimate revisions, or changes to a company's earnings expectations, to make building a winning portfolio easier.

Investors can count on the Zacks Rank's success, with #1 (Strong Buy) stocks producing an unmatched +25.41% average annual return since 1988, more than double the S&P 500's performance. But the model rates a large number of stocks, and there are over 200 companies with a Strong Buy rank, plus another 600 with a #2 (Buy) rank, on any given day.

But it can feel overwhelming to pick the right stocks for you and your investing goals with over 800 top-rated stocks to choose from.

That's where the Style Scores come in.

To maximize your returns, you want to buy stocks with the highest probability of success. This means picking stocks with a Zacks Rank #1 or #2 that also have Style Scores of A or B. If you find yourself looking at stocks with a #3 (Hold) rank, make sure they have Scores of A or B as well to ensure as much upside potential as possible.

As mentioned above, the Scores are designed to work with the Zacks Rank, so any change to a company's earnings outlook should be a deciding factor when picking which stocks to buy.

Here's an example: a stock with a #4 (Sell) or #5 (Strong Sell) rating, even one with Style Scores of A and B, still has a downward-trending earnings outlook, and a bigger chance its share price will decrease too.

Thus, the more stocks you own with a #1 or #2 Rank and Scores of A or B, the better.

Stock to Watch: Texas Capital (TCBI)

Texas Capital Bancshares, Inc., a financial holding company, is the parent company of Texas Capital Bank, a Texas-based bank headquartered in Dallas. The company focuses on leveraging local business and community ties to the five major metropolitan areas of Texas — Dallas, Houston, Fort Worth, Austin and San Antonio.

TCBI is a #1 (Strong Buy) on the Zacks Rank, with a VGM Score of B.

It also boasts a Value Style Score of B thanks to attractive valuation metrics like a forward P/E ratio of 19.67; value investors should take notice.

Five analysts revised their earnings estimate upwards in the last 60 days for fiscal 2024. The Zacks Consensus Estimate has increased $0.62 to $3.96 per share. TCBI boasts an average earnings surprise of 12.4%.

With a solid Zacks Rank and top-tier Value and VGM Style Scores, TCBI should be on investors' short list.

Zacks Investment Research