Texas Capital (TCBI) Earnings Expected to Grow: Should You Invest?

Texas Capital (TCBI) is anticipated to report a rise in earnings for the quarter ending December 2024, with expectations of increased revenues. Analysts are hopeful about the company’s upcoming earnings, as the consensus outlook suggests strong performance. This context sets the stage for potential movements in the stock price, depending on how the actual earnings compare to these forecasts.

If the company’s reported figures exceed expectations, the stock may see an upward trajectory. Conversely, a miss relative to these estimates could lead to a decline in stock value.

Management's outlook during the earnings call will largely influence not just the immediate price adjustments but also any adjustments in future earnings expectations. Therefore, it's vital to gauge the likelihood of a positive earnings surprise.

Zacks Consensus Estimate

The holding entity for Texas Capital Bank is projected to post earnings of $1.07 per share for the quarter, marking a significant increase of 64.6% compared to the previous year.

Expected revenues are set at $284.2 million, representing a 15.6% rise from the prior year's quarter.

Estimate Revisions Trend

Over the last 30 days, the consensus earnings-per-share (EPS) estimate has undergone a slight downward revision of 1.27%, demonstrating how analysts have re-evaluated their earlier predictions.

It's essential for investors to consider that an aggregate shift in estimates may not always capture the trends set by individual analysts.

Earnings Whisper

Changes in analyst estimates leading up to earnings announcements provide valuable insights into business conditions. This is a key component of the proprietary surprise model called the Zacks Earnings ESP (Expected Surprise Prediction).

The Zacks Earnings ESP examines the Most Accurate Estimate against the Zacks Consensus Estimate. This approach allows analysts who update their estimates shortly before an earnings report to apply the latest information, potentially leading to more accurate predictions.

A positive Earnings ESP may indicate a likelihood of earnings exceeding the consensus estimate. Research suggests that stocks with positive Earnings ESP readings combined with a Zacks Rank of #1 (Strong Buy), #2 (Buy), or #3 (Hold) tend to have positive surprises nearly 70% of the time. Moreover, a solid Zacks Rank enhances the predictive capacity of an Earnings ESP.

It’s important to note that a negative Earnings ESP does not definitively signal an earnings miss. Trying to forecast an earnings beat with confidence in this scenario is often challenging, particularly for stocks rated #4 (Sell) or #5 (Strong Sell) in Zacks Rank.

Performance of Texas Capital

In the case of Texas Capital, its Most Accurate Estimate has surpassed the Zacks Consensus Estimate, implying a generally positive view among analysts regarding the company’s earnings outlook. This has resulted in a solid Earnings ESP of +2.04%.

Additionally, the stock has a Zacks Rank of #3, contributing to the prospects of it beating the consensus EPS estimate.

Review of Past Earnings Surprises

When estimating future earnings, analysts often consider a company’s record of meeting or exceeding consensus expectations. Thus, reviewing Texas Capital’s previous earnings surprises can be informative for the upcoming earnings call.

For the most recently reported quarter, Texas Capital was estimated to earn $0.97 per share but actually delivered $1.62, achieving a remarkable surprise of +67.01%.

Over the past four quarters, the company has successfully topped consensus EPS estimates in two of those instances.

Final Thoughts

While an earnings beat or miss often influences stock performance, it is not always the sole factor. Many stocks may still decline even after an earnings beat due to other disappointing aspects. Conversely, unexpected positive factors could help a stock rise despite an earnings miss.

That being said, focusing on stocks projected to beat earnings expectations can enhance success rates. Therefore, it is wise to consider the Earnings ESP and Zacks Rank prior to a company’s quarterly release. Utilizing tools like an Earnings ESP Filter can help identify the best stocks for buying or selling ahead of earnings reports.

Texas Capital seems to be a promising candidate for an earnings surprise. However, investors should also take into account other influencing factors before deciding to invest in this stock or holding off before the earnings announcement.

Earnings, Investing, Analysis