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Aggressive Growth

Pinnacle Financial Partners Inc. (PNFP - Snapshot Report) has enjoyed upward earnings estimate revisions for 2012 and 2013 over the last 60 days, following a strong third-quarter report in mid October that included its third straight positive earnings surprise. This regional bank hit its 52 week high on October 18 and achieved a Zacks #1 Rank (Strong Buy) status on October 20. With a year’s return of approximately 23.4% and a long-term expected earnings growth rate of 12.5%, the stock is a solid growth pick.

Solid Q3 Results

On October 16, Pinnacle Financial reported third quarter earnings of 33 cents per share, outpacing the Zacks Consensus Estimate by 10.0%. The better-than-expected results were predominantly driven by top line growth, lower operating costs and a drop in provisions for loan losses. In the year-ago quarter, PNFP reported 72 cents.

Net interest income climbed 6.7% year over year to $40.9 million, while non-interest income increased 3.5% to $10.4 million. Moreover, the net interest margin expanded 18 basis points to 3.78%, and non-interest expenses declined 5.9% to $33.6 million.

Credit metrics continued to improve at Pinnacle Financial. Provisions for loan losses were $1.4 million, plummeting 61.1% from the year-ago quarter with net charge-offs exhibiting a downward trend as well. Net charge-offs were $1.9 million, declining 66.2% from $5.7 million in the prior-year quarter.

Earnings Estimates Advancing

Over the past 60 days, the Zacks Consensus Estimate for 2012 advanced 4.8% to $1.10 per share with 7 of 8 estimates moving higher. For 2013, the Zacks Consensus Estimate increased 5.6% to $1.32 over the same time frame, as 8 of 9 estimates moved upward.

The Zacks Consensus Estimate for 2012 reflects year-over-year growth of about 71.1%, while the expected growth rate for 2013 is 20.7%.

Reasonable Valuation

Shares of Pinnacle Financial currently trade at 17.4x 12-month forward earnings, almost in line with the peer group average. Its price to book ratio of 0.98 is at a 13% discount to the industry median of 1.13. The company has a trailing 12-month ROE of 5.8%, compared with the peer group average of 7.3%.

The stock has been continuously outperforming its 200 days moving average over the past year, exhibiting steadfast growth. Moreover, the stock is trading almost ahead of the S&P 500 over the same time frame.

Headquartered in Nashville, Tennessee, Pinnacle Financial is a bank holding company and conducts its primary operations through its wholly-owned subsidiary, Pinnacle National Bank. Incorporated in 2000, the company conducts its businesses through 29 offices in eight Middle Tennessee counties and 3 offices in Knoxville. The company has a market cap of about $659.9 million. Capital City Bank Group Inc. (CCBG) and Farmers Capital Bank Corporation (FFKT) are the other Zacks #1 Rank (Strong Buy) stocks in the same industry.

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