Print
Banking & Finance

Analysts Expect Live Oak Bancshares To Report Lower Q1 Revenues

By Jenny Callison, posted Apr 24, 2019

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.

Ico insights

INSIGHTS

SPONSORS' CONTENT
Deedee gasch

Analyzing the Wrongful Death Lawsuit Against Tiger Woods, His Bar, and His Girlfriend: A Lawyer’s Perspective

Deedee Gasch - Cranfill Sumner & Hartzog LLP
Dallas headshot 300x300

A Planning Process for Future Success

Dallas Romanowski - Cornerstone Business Advisors
Jim ellis headshot 10311631058

Questions to Ask Before Choosing a Digital Agency

Jim Ellis - Signal

Trending News

Renting Continues To Get More Expensive In Wilmington, Data Shows

Cece Nunn - Jun 24, 2019

Medical Building In Wilmington Sells For More Than $5M

Cece Nunn - Jun 25, 2019

At Mayfaire, New Physical Therapy Facility Throws Out Insurance Model

Cece Nunn - Jun 24, 2019

Adam Sisk Promoted To Principal Engineer

Christina Haley O'Neal - Jun 25, 2019

With ILM Business Park Fully Leased, Land Still Open For Development

Christina Haley O'Neal - Jun 25, 2019

In The Current Issue

Software Firm Codes For Growth

After growing PS Solutions in Pennsylvania, founder Wayne Hippo came to Wilmington with the goal of replicating the company’s growth in the...


Interest In Solar Brightens

From residential and commercial to utility-scale solar operations, some in the industry say solar has become more than just an environmental...


Selling Iconic Property On Iconic Island

More than 30 years later, Buzzy Northen and his wife, Ellen Northen, are still in love with Figure Eight Island. “It’s just heaven,” Buzzy N...

Book On Business

The 2019 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

Power Breakfast - The H Word (June 13, 2019)
2019 WilmingtonBiz Expo Keynote Lunch - CEO, nCino, Pierre Naude`
Health Care Heroes 2018