Is Truist Financial (TFC) a Buy or Sell Before Earnings?

Bank holding company Truist Financial Corporation (TFC) is planning to downsize its workforce over the next few months to save about $300 million in costs as part of its larger cost savings program, which is expected to continue till the first quarter of 2024. Additionally, the company might consider selling its remaining 80% stake in its insurance subsidiary for a potential $10 billion.

TFC is set to report its third-quarter results on October 19. In the second quarter, $538 million in provisions for credit losses compared to $171 million a year earlier. The company also reported $0.92 earnings per common share, missing the analysts’ expectations of $1.01 per share.

Against this backdrop, an examination of TFC's key financial indicators is necessary to comprehend why it could be wise to wait for a better entry point in the stock.

Financial Performance Analysis: Upward Trends and Fluctuations in TFC's Key Metrics

The trailing-12-month net income of TFC has shown an overall upward trend, with notable fluctuations over the years. Here is a summary of the key points:

• The series starts on December 31, 2020, with a net income of $4.48 billion.
• Over the course of 2021, we see continued growth, peaking at $6.44 billion by December 31, 2021.
• However, a downward fluctuation begins in 2022, reaching a low point of $6.18 billion on September 30, 2022. This downturn period sees a decline of approximately $260 million from its peak at the end of 2021.
• This is followed by a minor recovery towards the end of 2022, with the net income reported on December 31, 2022, back to $6.26 billion.
• The first half of 2023 shows a mixed picture. From March 31, 2023, when net income was $6.36 billion, a decrease is noted again by June 30, 2023, dipping to $6.14 billion.

Comparing the last available value ($6.14 billion in June 2023) against the first ($4.48 billion in December 2020), TFC's net income has grown significantly. This represents a growth rate of approximately 37% despite the recorded fluctuations within this period.

It is important to mention that the company has struggled with maintaining its net income in recent times, it is therefore essential to observe future updates closely for a more accurate assessment of trends.

The trailing-12-month revenue of TFC has shown some fluctuation over time but with generally positive growth. Here's a summary:

• By December 31, 2020, TFC had a revenue of $20.37 billion.
• The revenue increased consistently over the next three quarters, peaking at $23.11 billion by December 31, 2021.
• However, by the first quarter of 2022, the revenue slightly dropped to $23.10 billion and further decreased to $22.86 billion and $22.46 billion in the second and third quarters respectively.
• As of the end of the year on December 31, 2022, the revenue showed a slight recovery, increasing to $22.26 billion.
• In the first half of 2023, the trend continued with revenues of $22.44 billion and $22.34 billion at the end of the first and second quarters, respectively.

In terms of growth from the start of the series (December 31, 2020) to its latest point (June 30, 2023), there was an increase of $2.97 billion or approximately 14.57%. Notably, despite a number of fluctuations, the last noted revenue of $22.34 billion in June 2023 is higher than the starting figure in 2020.

The trend of the reported Return On Sales (ROS) of TFC showed a generally upward momentum with some fluctuations over the course of the period from December 2020 to June 2023.

• From December 30, 2020, when the ROS was at 0.27, there was a consistent rise seen until March 31, 2021, when ROS increased to 0.29.
• This upward trend continued, peaking at 0.35 on September 30, 2021.
• A slight dip occurred from December 31, 2021, to September 30, 2022, with ROS fluctuating between 0.34 to 0.35.
• The last quarter of 2022 ended with a slight increase, moving the ROS back to 0.35 as of March 31, 2023.
• A decline was seen on June 30, 2023, with the ROS falling back to 0.34.

Taking into consideration the first value (0.27) and the last value in the series (0.34), TFC experienced an approximate growth rate of 26% over this period. This marks a significant increase, but the consistency of the upward trajectory varied, as seen in the fluctuation of ROS values. Emphasis on the most recent data shows a slight dip in growth.

The Analyst Price Target (APT) for TFC reveals a generally downward trend over the observed period.

• Starting at $67.25 in mid-November 2021, the APT increased slightly and peaked at $72 from late January to late March 2022.
• A period of fluctuation and slow decline followed from April to August 2022, with the APT hitting a low of $54 by the end of July 2022.
• From September 2022 to early April 2023, the APT largely hovered around the $50-$55 range, with minor fluctuations within this range.
• An accelerated downward trend started from mid-April 2023, bringing the APT down to a low of $35.5 by mid-October 2023.

The overall growth rate from the first value to the last is -47.2%, indicating a significant reduction in the analyst price target for TFC during this period. Recent data, particularly the series' last value ($35.5, dated October 16, 2023), emphasizes the continuing downward and bearish trend in the APT.

Analyzing TFC's Share Price: A Decelerating Trend from April to October 2023

Based on the provided data, it can be observed that:

• On April 21, 2023, TFC's share price was $33.43.
• There was a significant decrease over the weeks till May 12, 2023, when the price fell to $27.79.
• Beginning May 19, 2023, the price started to slightly recover, reaching its peak of $32.88 on July 14, 2023.
• Following July 14, there was an intermittent decrease, with the lowest price observed on August 18, 2023, at $29.45.
• In September 2023, the prices see-sawed around the $30 mark, with a slight overall downtrend.
• The share price hit a new low on October 6, 2023, at $27.28 but bounced back slightly to reach $28.41 on October 13, 2023.

Thereby indicating a definite decelerating trend in the share prices of TFC from April 2023 to October 2023. Please note that while the share prices recovered slightly from time to time, the overall growth rate was negative as prices continued to drop over the considered period. Here is a chart of TFC's price over the past 180 days.

Analyzing TFC's Performance: Trends in Value, Growth, and Momentum Dimensions

The POWR Ratings grade of TFC, a stock in the 28-stock Southeast Regional Banks category, has been fluctuating over time but exhibits a common pattern of ranking toward the top of its category. Here are noteworthy data points gleaned from the provided records:

• As of the week of April 22, 2023, TFC had a POWR grade of C (Neutral) and ranked #5 in its category.
• The rank improved to #4 in the category the subsequent week of April 29, 2023, while maintaining the same POWR grade of C (Neutral).
• It kept the #5 rank between May 6, 2023, and May 20, 2023, with a POWR grade of C (Neutral) before sliding to #7 by June 3, 2023.
• Furthermore, as of July 15, 2023, the POWR grade dropped to D (Sell), and its rank in the category fell to #10. This drop continued until it reached a rank of #13 in the week of August 5, 2023.
• The POWR grade then bounced back to C (Neutral) as of the week of August 19, 2023, with the rank being maintained at #12.
• As of the weeks of October 7 and October 14, 2023, TFC had a POWR grade of C (Neutral) and stood at #8 in its category, showing some improvement.
• As per the last provided data point (as of October 16), the latest value of TFC is C (Neutral) for its POWR grade, and it ranks #8 in the Southeast Regional Banks category of stocks.

Based on the provided POWR Ratings data for TFC, the three most noteworthy dimensions are Value, Growth, and Momentum. These three dimensions occasionally have the highest ratings among all the dimensions and demonstrate some clear trends over time. 

Value: 

• TFC's Value dimension score showed a steady rising trend over time.
• The Value score was 74 in April 2023 and gradually increased to a peak of 83 by August 2023.
• Even after reaching its peak, it remained relatively high, with a stable score of 82 from September to October 2023. 

Growth: 

• The Growth dimension started relatively strong, with a score of 73 in April 2023.
• However, over the following months, there was a clear downtrend, with the score dropping to 26 by August and September 2023.
• By mid-October 2023, it dipped slightly to 25, which is significantly lower than the initial score. 

Momentum: 

• Momentum saw a mixed trend. It started at 71 in April 2023, fell to 47 by July 2023, but had a notable increase to 64 by August 2023.
• Eventually, it decreased again to 48 by mid-October 2023.

In conclusion, the Value dimension demonstrated a positive growth trend throughout the observed period, becoming the strongest dimension for TFC. Meanwhile, the Growth dimension exhibited a clear downward trend, and the Momentum dimension fluctuated significantly during this period.

How does Truist Financial Corporation (TFC) Stack Up Against its Peers?

Other banking stocks that may be worth considering are Banco Macro S.A. (BMA), KB Financial Group Inc. (KB), and Akbank T.A.S. (AKBTY) from the Foreign Banks sector. These stocks have better POWR Ratings. Click here to explore more Foreign Banks stocks.

What To Do Next?

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TFC shares were trading at $29.03 per share on Monday afternoon, up $0.62 (+2.18%). Year-to-date, TFC has declined -29.35%, versus a 15.21% rise in the benchmark S&P 500 index during the same period.

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.

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