Is PNC Financial (USA Stocks:PNC) outlook still optimistic based on the latest debt level?
 | By Aina Ster | Macroaxis Story |
PNC Financial Services carries a debt of 58.71 billion, with a debt to equity (D/E) ratio of 0.73. This is acceptable considering its current industry classification. The asset utilization indicator represents the revenue generated for every dollar of assets reported by a company. PNC Financial has an asset utilization ratio of 3.93 percent, implying that the company generates $0.0393 for each dollar of assets. An increasing asset utilization suggests that PNC Financial Services is becoming more efficient in utilizing each dollar of assets for its daily operations.
Major Takeaways
PNC Financial Services (PNC) has shown a robust financial position with a significant amount of cash and short-term investments amounting to $146.4B, providing the company with a strong buffer against potential market downturns. However, the company's total cash from financing activities is at a loss of $6.1B, indicating a high level of debt, which could potentially increase the company's financial risk. Despite this, PNC's net interest income stands at a healthy $14.2B, suggesting that the company's core business operations remain profitable. Investors should consider these factors when assessing PNC's investment potential, as the company's high debt levels could impact its future growth prospects.Macroaxis uses a strict editorial review process to publish stories and blog posts. Our publishers support our company and may receive a small commission when the partner links or references are utilized. Commissions do not affect the opinions or evaluations of our editorial team. The information our editors and media partners deliver is confidential and licensed for your sole use as a Macroaxis user. We reserve all rights to the content of this article, and therefore copying or distributing this story in whole or in part is strictly prohibited.
Reviewed by Gabriel Shpitalnik
PNC Financial Services, a key player in the Financial Services sector, particularly in the Banks - Regional industry, ended its recent financial period with a significant cash flow of $6.5B and a healthy $146.4B in cash and short-term investments. However, a closer look at the company's balance sheet reveals a considerable debt burden. The firm's non-current liabilities total a staggering $511.5B, and other current liabilities are at $436.3B. This high debt level, coupled with the $4.5B loss in investments, might raise concerns about the company's financial health. Yet, PNC's net invested capital stands at $104.5B, and retained earnings are robust at $53.6B, suggesting that the company is well-positioned to manage its debt. The company's net interest income of $14.2B and income before tax of $7.6B also point towards a strong financial performance. Analysts' target price estimates range from $110 to $176, with an average of $151.55, indicating potential for growth. The forward dividend yield of 0.0413 and a dividend per share of $6.05 may also attract income-focused investors. However, investors should carefully consider PNC's debt levels and the single strong sell recommendation from analysts before making investment decisions. PNC Financial Services is set to announce its earnings tomorrow, with the forthcoming quarterly report anticipated on January 16, 2024. Currently, PNC Financial's Calculated Tax Rate is projected to decrease, based on the trends observed in the past few years of reporting. The Accrued Expenses Turnover for the current year is expected to increase to 4.19, while the Net Income Per Employee is predicted to decrease to approximately $83.2K. Despite some baby boomers expressing concerns about the banking sector, it is worth considering PNC Financial Services as a viable investment option.PNC Financial financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of PNC Financial, including all of PNC Financial's outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of PNC Financial assets, the company is considered highly leveraged. Understanding the composition and structure of overall PNC Financial debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business is and if it is worth investing in it. Please read more on our technical analysis page.
Understanding PNC Total Debt
PNC Financial Services liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. PNC Financial Services has to fulfill its short-term liabilities in this reporting year and should be no more than 12 months old. Long-term debt, on the other hand, is anything beyond the 12-month payment timeframe. Common short-term liabilities found on PNC Financial balance sheet include debt obligations and money owed to different PNC Financial vendors, workers, and loan providers. Below is the chart of PNC main long-term debt accounts currently reported on its balance sheet. You can use PNC Financial Services financial leverage analysis tool to get a better grip on understanding its financial positionHow important is PNC Financial's Liquidity
PNC Financial financial leverage refers to using borrowed capital as a funding source to finance PNC Financial Services ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. PNC Financial financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to PNC Financial's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of PNC Financial's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between PNC Financial's total debt and its cash.
Breaking it down a bit more
The latest surge in PNC Financial Services short term price appreciation may encourage shareholders to take a closer look at the company as it is trading at a share price of 148.92 on very low momentum in trading volume. The company executives have successfully maneuvered the company at convenient times to take advantage of all market conditions in December. The stock standard deviation of daily returns for 90 days investing horizon is currently 1.64. The below-average Stock volatility is a good sign for longer-term investment options and for buy-and-hold investors. Every cloud has a silver lining, and in the case of PNC Financial Services, the silver lining comes in the form of its robust net assets, which stand at a staggering $557.26B. However, it's important to take note of the company's total debt, which is currently at $58.71B, with long-term debt accounting for $26.6B of this figure.The company's net interest income of $14.2B and cash flow from operations at $9.29B, suggest that PNC has the financial strength to manage its debt levels effectively. However, the probability of bankruptcy stands at 45.59%, a figure that cannot be ignored. The company's forward dividend yield of 0.0413 and a return on equity of 0.13 also indicate a potential for returns. However, the risk-adjusted performance of 0.1257 and a downside deviation of 1.4 suggest potential volatility. In conclusion, while PNC Financial Services has significant assets and income streams, its high debt levels and bankruptcy risk may pose challenges for potential investors. .
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