Eric Dutram

Bull of the Day: Popular (BPOP)

by

March 15, 2013 |

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The financial sector has broadly been leading the market higher as of late. In fact, the segment has crushed the S&P 500’s return over the past one year period by about 500 basis points, suggesting to many that the sector is back on track.

Yet while investors have seen big gains across the board in this corner of the market, there is one industry that has been doing even better; regional banks. These smaller banking institutions have avoided the worst of the financial crisis, and are in many ways, leading the pack in the financial space.

A great example of this industry trend is in the case of Popular Inc (BPOP - Snapshot Report), a small, Puerto Rico-based banking institution. The company has seen its shares surge over the past few months, and based on some ongoing trends in the space, could see a continuation of this trend heading into Q2 as well.

BPOP in focus

A big reason for the optimism over BPOP is the company’s ability to crush earnings estimates. In the past four quarters, the company has posted an average positive surprise of 42%, including a 58% beat in the previous quarter. This demonstrates that the company is more than capable of exceeding analyst expectations, even when sentiment is broadly positive over the industry.

This is important when looking at the earnings picture developing for the next report, which is due out in mid-April. For that release, the company has seen earnings estimates surge higher over the past 90 days, largely thanks to a couple of positive analyst revisions.

In fact, the company hasn’t seen any negative revisions in the past two months, meaning that there is complete agreement on the company’s prospects—among following analysts-- for the near future. If you add in how broadly estimates have moved higher in the process, one can probably assume that BPOP is in store for another beat when it reports next month.

This is especially true when considering that the stock has a top Zacks Rank of 1 or ‘Strong Buy’, along with an extremely bullish Zacks Industry Rank. Its current segment is ranked 14th out of 265 covered industries, so it is hard to find a more favorable group than the segment BPOP calls home.

Bottom Line

Sentiment is very bullish on regional banks, and the financial sector in general. While there are a number of top ranked choices in the sector, BPOP may be one that has flown under your radar that could be poised to surge.  

The company has a solid history of beating estimates and it clearly has momentum on its side as well. The firm also has an impressive Zacks Earnings ESP of over 10%, which when combined with the Zacks Rank of 1, does suggest a beat for the next report.

So for those who want to get in on the regional bank boom, BPOP could be an excellent choice that still may have plenty of room to run in the weeks and months ahead.

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