It has been about a month since the last earnings report for People's United Financial, Inc. PBCT. Shares have lost about 4.6% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

People's United Q1 Earnings in Line, Dividend Up

People's United’s first-quarter 2017 operating earnings of $0.22 per share were in line with the Zacks Consensus Estimate. The reported figure was up 4.8% year over year from $0.21.

Higher revenues and elevated expenses were recorded in the quarter. Growth in loans and deposit balances were the positives. Moreover, credit quality marked a significant improvement.

Net income came in at $70.8 million or $0.22 per share compared with $62.9 million or $0.21 per share in the prior-year quarter.

Revenues Escalate, Expenses Flare Up

Net revenue on a fully taxable basis was up 4% year over year to $342.8 million in the quarter, but was almost in line with the Zacks Consensus Estimate.

Net interest income on a fully taxable basis totaled $258.1 million, up 4.3% year over year. However, NIM contracted 1 basis point (bp) year over year to 2.82%.

Non-interest income climbed 2.9% year over year to $84.7 million. Higher investment management fees, cash management fees and other non-interest income were the primary reasons for the upsurge.

Non-interest expenses increased 4.0% on a year-over-year basis to $226.1 million. Rise in compensation and benefits, occupancy and equipment expenses and regulatory assessments were partially offset by a fall in professional and outside services, along with lower operating lease expense and other non-interest expenses.

As of Mar 31, 2017, total loans were $29.7 billion, up 4.2% from the prior-year quarter. Further, total deposits increased approximately 4.8% to $30.5 billion from the prior-year quarter end.

Credit Quality Improved

Overall, credit quality metrics at People’s United improved.

As of Mar 31, 2017, non-performing assets were $182.9 million, down 3.4% year over year. Ratio of non-performing loans to total originated loans contracted 6 bps year over year to 0.55%. Also, net loan charge-offs decreased 57.9% year over year to $2.4 million.

Further, provision for loan losses was $4.4 million, down 57.7% year over year.

Stable Capital Position & Profitability Ratios

Capital ratios of People’s United displayed a strong financial position. As of Mar 31, 2017, total risk-based capital ratio climbed to 12.6% from 11.5% in the year-ago quarter. Further, tangible equity ratio was 7.4%, up from 7.3% in the year-ago quarter.

The company’s profitability ratios remained solid. Return on average tangible stockholders’ equity came in at 9.6%, up from 9.4% in the prior-year quarter. Return on average assets of 0.70% was up from 0.65% in the year-ago quarter.

Dividend Update

Concurrent with the earnings release, the Board of Directors of People’s United announced 1.5% hike in the company’s quarterly common stock dividend to $0.1725 per share. The new dividend will be paid on May 15 to common shareholders on record as of May 1, 2017.

2017 Outlook (excluding the pending acquisition of Suffolk Bancorp)

Management projects loan portfolio to grow in the range of 5–7%.

Net interest income is projected to grow in the range of 5–7%. This is based on the expectation of NIM to be in the range of 2.8–2.9% (assumption of 125 basis point rate increase in Fed funds in mid-2017 and no change in current slope of the yield curve). Further, the company expects non-interest income to rise in the range of 5–7%.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.

People's United Financial, Inc. Price and Consensus

People's United Financial, Inc. Price and Consensus | People's United Financial, Inc. Quote

VGM Scores

At this time, People's United's stock has an subpar Growth Score of 'D', while it is doing a lot better on the momentum front with 'B'. Charting a somewhat similar path, 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.

Zacks' style scores indicate that the company's stock is more suitable for momentum investors than value investors.

Outlook

While estimates have been trending upward for the stock the magnitude of these revisions is net zero. The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.

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