As Wall Street anticipates the release Wednesday afternoon of Live Oak Bancshares' first quarter 2019 earnings report, analysts expect the company to report a decline in earnings.
Revenues, according to investment research firm Zacks, are expected to be about $43 million, down just over 22% from those of Q1 2018. That level of revenue would equate to earnings per share of about 1 cent.
The Wilmington-based banking company plans to release its first-quarter earnings report after markets close Wednesday.
Earnings per share for Q4 2018 were 26 cents, but even that represented a decrease from the EPS of 34 cents the previous quarter.
Live Oak saw a downward trend in its overall 2018 report as well. For the entire year ended Dec. 31, 2018, net earnings totaled $51.4 million ($1.24 per diluted share), compared to $100.5 million ($2.65 per diluted share) for the previous year.
Company officials did say at the time that the fourth-quarter 2017 earnings "included a one-time pretax gain of $68.0 million related to an equity method investment in Apiture, LLC ("Apiture"), an $18.9 million revaluation of the Company's net deferred tax liability, and several other smaller non-routine costs."
Part of the reason for Live Oak's slumping earnings may be the amount of bad debt it holds, say analysts at Australia-based Simply Wall Street, an investment research firm.
"One of the biggest risks Live Oak Bancshares, Inc. faces as a bank is bad loans, also known as credit risk," firm analysts posted Feb. 22. "As a small cap stock in the heavily regulated financial services sector, its stock has many factors to consider.
"The ability for borrowers to repay their loans depends on the stability of their salary and interest rate levels which is impacted by macroeconomic events and in turn impacts the profitability of small banks," the analyst post continued. "This is because bad debt is written off as an expense and impacts Live Oak Bancshares’s bottom line and shareholders’ value."
In a separate post, the analysts noted, "Live Oak Bancshares’s ability to forecast and provision for its bad loans relatively accurately suggests it has a good understanding of the level of risk it is taking on. The bank may have poorly anticipated the factors contributing to higher bad loan levels if it writes off more than 100% of the bad debt it provisioned for."
While Simply Wall Street saw many strengths in Live Oak Bancshares' overall picture, it predicted a continued downward trend in earnings over the next one-to-three years. And while those analysts expect Live Oak's revenue to grow by about 11.5% annually, they do not consider this a high-growth rate.
In December, Zacks analysts noted the downward movement of Live Oak's stock and had this to say:
"A key reason for this move has been the negative trend in earnings estimate revisions. For the full year, we have seen one estimate moving down in the past 30 days, compared with no upward revisions. This trend has caused the consensus estimate to trend lower."
Aaron Deer, a managing director and equity research analyst at Sandler O'Neill + Partners, is more bullish on Live Oak prospects.
In his analysis, which he shared Wednesday with the Greater Wilmington Business Journal, he maintains a "buy" recommendation for investors and predicts a Q1 earnings per share estimate of 2 cents, "A penny above the Street consensus," he wrote, adding, "Our estimate is sharply below the earnings runrate of the past several quarters due to the shift in [Live Oak's] strategy toward retaining the majority of its loan production versus selling a significant portion for the gains on such sales," Deer said in his analysis.
He continued, "Accordingly, Live Oak's earnings stream and profitability is sharply reduced but should build rapidly over the next two years as the balance sheet expands and operating leverage is realized."
As of 3:15 p.m. Wednesday, Live Oak Bancshares' stock, which trades as LOB on Nasdaq, was at $16.36 per share. Its highest price to date in 2019 has been about $17 per share; its 2018 high was over $32 per share.
Passenger Rail Study Offers New Details About Proposed Wilmington To Raleigh Route
Emma Dill
-
Apr 22, 2024
|
|
Severe Weather Postpones Trump Rally In Wilmington
Emma Dill
-
Apr 20, 2024
|
|
Will NC Be CNBC's Three-time Top State For Business?
Audrey Elsberry
-
Apr 22, 2024
|
W.R. Rayson is a family-owned manufacturer and converter of disposable paper products used in the dental, medical laboratory and beauty indu...
Michelle Penczak, who lives in Pender County, built her own solution with Squared Away, her company that now employs over 400 virtual assist...
“Our little town, especially the mainland area, is growing by leaps and bounds. So having somewhere else besides the beach for kids to go an...
The 2024 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.