Why Is The PNC Financial Services Group (PNC) Up 10.2% Since Last Earnings Report?

It has been about a month since the last earnings report for The PNC Financial Services Group, Inc (PNC). Shares have added about 10.2% in that time frame, outperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is The PNC Financial Services Group due for a pullback? 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 drivers. PNC Financial Q3 Earnings Beat on Higher Fee Income, Costs RisePNC Financial’s third-quarter 2024 adjusted earnings per share of $3.49 surpassed the Zacks Consensus Estimate of $3.29. In the prior-year quarter, the company reported earnings per share of $3.60.Results were aided by a rise in fee income and higher loan balance. However, a decline in NII and an increase in provisions for credit losses, along with a rise in expense base, were major headwinds. Net income (GAAP basis) was $1.5 billion, down 4.1% from the prior-year quarter.PNC Financial’s Quarterly Revenues and Expenses RiseTotal quarterly revenues were $5.43 billion, up 3.8% year over year. Also, the top line surpassed the Zacks Consensus Estimate of $5.37 billion.Quarterly NII was $3.4 billion, which declined marginally from the year-ago quarter. Net interest margin (NIM) decreased 7 basis points to 2.64%. Non-interest income increased 11.4% year over year to $2 billion. The improvement was driven by a rise in all the components of fee income except for residential and commercial mortgage income. Non-interest expenses totaled $3.33 billion, which increased 2.5% from the year-ago figure. The rise was due to an increase in personnel expenses and equipment expenses. The efficiency ratio was 61% compared with 62% in the year-ago quarter. A fall in the efficiency ratio reflects increased profitability.PNC Financial’s Loan Balance Declines, Deposits RiseAs of Sept. 30, 2024, total loans were $321.4 billion, which decreased slightly on a sequential basis. However, total deposits increased 1.8% from the end of the previous quarter to $424 billion.PNC Financial’s Credit Quality DeterioratesNon-performing loans jumped 21.4% year over year to $2.6 billion. Additionally, the company reported a provision for credit losses of $243 million in the third quarter, which surged 88.4% from the year-earlier quarter. Further, net loan charge-offs were $286 million, which increased significantly from $121 million in the third quarter of 2023.Nonetheless, the allowance for credit losses decreased 1.7% to $5.3 billion.PNC Financial’s Capital Position Improves, Profitability Ratios WeakenAs of Sept. 30, 2024, the Basel III common equity tier 1 capital ratio was 10.3% compared with 9.8% as of Sept. 30, 2023.Return on average assets and average common shareholders’ equity were 1.05% and 11.72%, respectively, compared with 1.12% and 13.65% witnessed in the prior-year quarter.PNC Financial’s Capital Distribution ActivityIn the third quarter of 2024, PNC Financial returned $0.8 billion of capital to shareholders. This included more than $0.6 billion in common stock dividends and more than $0.1 billion in common share repurchases.OutlookFourth Quarter The company expects average loans to remain stable from the third quarter’s reported figure of $319.6 billion.Management anticipates NII to rise around 1% from $3.4 billion reported in the third quarter of 2024.Fee income is expected to decline 5-7% from $1.95 billion reported in the third quarter of 2024.Management anticipates total revenue to remain stable at $5.4 billion in the third quarter of 2024.Other non-interest income is projected between $150 million and $200 million compared with $69 million reported in the third quarter of 2024.Adjusted non-interest expenses are envisioned to increase 2-3% from $3.3 billion reported in the third quarter of 2024.Net charge-offs are estimated to be around $300 million compared with the third-quarter 2024 reported figure of $286 million.Full-Year 2024Average loans are expected to be down less than 1% from $323.5 billion in 2023.Management suggests the top line to be down 1-2% from the $21.49 billion reported in 2023. NII is anticipated to decline approximately 4% from $13.91 billion.Non-interest income (excluding visa gain and securities losses) is projected to be up 3-5% from $7.57 billion reported in 2023. Management lowered the current guidance due to ongoing softness in mortgage activity and, to a lesser extent, loan-related capital market fees.Adjusted non-interest expenses (Excluding FDIC special assessment and PNC foundation contribution expense) are forecasted to be down approximately 1% from the reported figure of $13.34 billion in 2023, due to an increased CIP target. The effective tax rate is estimated to be 18.5%, whereas the company reported 16.2% in 2023.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed an upward trend in estimates review.VGM ScoresCurrently, The PNC Financial Services Group has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, 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.OutlookEstimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, The PNC Financial Services Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.Performance of an Industry PlayerThe PNC Financial Services Group is part of the Zacks Financial - Investment Bank industry. Over the past month, Wells Fargo (WFC), a stock from the same industry, has gained 13.9%. The company reported its results for the quarter ended September 2024 more than a month ago.Wells Fargo reported revenues of $20.37 billion in the last reported quarter, representing a year-over-year change of -2.4%. EPS of $1.52 for the same period compares with $1.39 a year ago.For the current quarter, Wells Fargo is expected to post earnings of $1.32 per share, indicating a change of +2.3% from the year-ago quarter. The Zacks Consensus Estimate has changed +1.1% over the last 30 days.Wells Fargo has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.Free: 5 Stocks to Buy As Infrastructure Spending SoarsTrillions of dollars in Federal funds have been earmarked to repair and upgrade America’s infrastructure. In addition to roads and bridges, this flood of cash will pour into AI data centers, renewable energy sources and more.In, you’ll discover 5 surprising stocks positioned to profit the most from the spending spree that’s just getting started in this space.Download How to Profit from the Trillion-Dollar Infrastructure Boom absolutely free today.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The PNC Financial Services Group, Inc (PNC): Free Stock Analysis Report Wells Fargo & Company (WFC): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks