Analyst Note| Eric Compton |
Narrow-moat Truist reported fourth-quarter earnings of $1.20 per share, fairly close to FactSet consensus of $1.24 and in line with our own estimate of $1.21. Top-line revenue of $6.2 billion was also essentially in line with consensus and our own estimate. Expenses did come in a bit above our forecasts, up 3% sequentially versus our own expectation for flat expenses during the quarter. Half of the extra growth was from higher “merger-related” items while much of the rest was related to additional compensation. We were hoping that merger-related items would be over in 2023, but it is now expected that there will be another roughly $100 million or more of these costs once again. We would read some of this as simply inflationary cost pressures, which has been a risk we’ve highlighted for 2023 outlooks. Even so, the 2023 outlook for revenue growth of 7%-9% is still roughly in line with our original expectations for 2023. The expense outlook for growth of 5%-7% is only slightly above our original forecast. While we plan on raising our 2023 expense outlook slightly, likely by just over 1%, we would only expect our fair value estimate of $60 to decrease by a low-single-digit amount, and we still see shares as undervalued. We're hoping a 2023 with fewer one-time charges and the abatement of other merger-related items will help make more clear what Truist's true earnings capabilities are.