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

Texas Capital (TCBI) is anticipated to report a substantial increase in its earnings compared to the previous year, alongside higher revenue figures, when it unveils results for the quarter ending December 2024. This forecast builds a general picture of the company's expected performance, yet how these results actually stack up against estimates is crucial, as it can significantly influence the stock's performance in the near term.

If the company's earnings surpass expectations in the upcoming report, it is likely that the stock price will rise. Conversely, any shortfall in meeting these expectations could lead to a decline in the stock price.

The management's commentary on business conditions during the earnings call will play a significant role in determining how sustainable any immediate stock price movement will be. Therefore, it is beneficial for investors to glean insights into the likelihood of a positive surprise in earnings per share (EPS).

Zacks Consensus Estimate

Texas Capital, which serves as the parent company of Texas Capital Bank, is set to announce quarterly earnings of $1.07 per share. This figure represents a striking year-over-year increase of 64.6%.

For this period, revenue is projected to reach $284.2 million, reflecting a 15.6% year-over-year growth.

Estimate Revisions Trend

Over the past month, the consensus EPS estimate has seen a modest downward revision of 1.27%. This adjustment indicates a general reassessment by analysts following the company's performance and market conditions.

However, it is essential to recognize that an overall revision trend does not necessarily align with the individual perspectives of all analysts covering the stock.

Earnings Whisper

In the lead-up to the earnings announcement, estimate revisions provide insights regarding the company's business conditions during the reporting period. This analysis is a core element of the proprietary model known as Zacks Earnings ESP (Expected Surprise Prediction).

The Zacks Earnings ESP contrasts the Most Accurate Estimate with the Zacks Consensus Estimate, where the most accurate figure stems from more recent analyst updates. The premise is that updates made closer to the earnings release date may reflect the most current and therefore reliable information.

A positive or negative Earnings ESP reading can indicate the likelihood of a divergence from expected earnings, with strong predictive power observed predominantly in stocks with positive readings.

Having a positive Earnings ESP, when coupled with a Zacks Rank of #1 (Strong Buy), #2 (Buy), or #3 (Hold), significantly improves the chances of realizing an earnings surprise, as historical data shows that this combination yields positive results about 70% of the time.

On the flip side, negative Earnings ESP readings do not guarantee an earnings miss. It has been found challenging to project an earnings beat confidently for stocks that present negative ESP readings or are rated #4 (Sell) or #5 (Strong Sell).

How Have the Numbers Shaped Up for Texas Capital?

Currently, the Most Accurate Estimate for Texas Capital stands above the Zacks Consensus Estimate, indicating an optimistic shift among analysts regarding the company’s earning potentials, thus yielding an Earnings ESP of +2.04%.

Furthermore, the company is currently assigned a Zacks Rank of #3.

This combination suggests a high likelihood that Texas Capital will exceed the consensus EPS estimate during its forthcoming earnings release.

Does Earnings Surprise History Hold Any Clue?

It is common for analysts to consider a company’s historical performance when predicting future earnings. Therefore, evaluating Texas Capital’s past surprise data can provide relevant insights.

For example, in its previous quarter, Texas Capital was projected to report earnings of $0.97 per share but actually reported earnings of $1.62, resulting in a remarkable surprise of 67.01%.

Across the past four quarters, the company has successfully surpassed consensus EPS estimates in two instances.

Bottom Line

Whether a stock experiences an upward or downward shift following its earnings report is influenced by various factors beyond just an earnings beat or miss. Some stocks may decline even after a strong earnings report, while others may rise despite disappointing results.

Nonetheless, investing in stocks with a high probability of beating estimates can improve investment success, underscoring the importance of examining a company's Earnings ESP and Zacks Rank prior to earnings announcements. Using the Earnings ESP Filter can help identify the most promising stocks to consider buying or selling before their results come in.

In summary, Texas Capital exhibits characteristics suggesting it could be a strong candidate for an earnings beat. However, investors should also evaluate other factors before deciding whether to invest in this stock as it approaches its earnings announcement.

Stay informed about upcoming earnings releases by keeping an eye on the earnings calendar.

Earnings, Stocks, Investment