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Analyst Blog

On Sep 9, 2013, we reaffirmed our Outperform recommendation on Washington Federal Inc. (WAFD - Analyst Report). Our decision rests on the company’s consistent improvement in asset quality and efficient capital deployment activities. Moreover, Washington Federal’s fiscal third-quarter earnings marginally beat the Zacks Consensus Estimate as well.

Why Neutral?

On Jul 18, Washington Federal reported fiscal third-quarter 2013 earnings per share of 36 cents, beating the Zacks Consensus Estimate of 33 cents. Results were driven by a rise in other income, partially offset by lower net interest income and increased operating expenses.

The Zacks Consensus Estimate for 2013 advanced 4.5% to $1.39 per share over the last 60 days. Further, for 2014, the Zacks Consensus Estimate increased 12.1% to $1.48 per share over the same time period. As a result, Washington Federal currently carries a Zacks Rank #2 (Buy).

Washington Federal displays a long-term upward trend in its loan and deposit growth. On further improvement in the market scenario, demand for loans will continue to increase. The company’s credit quality has also been improving, with the contraction of nonperforming assets and net charge-offs.

Efficient capital deployment in the form of regular dividend hikes and share buybacks is one of the strengths of Washington Federal. We expect management to continue deploying excess capital to enhance shareholder value in the forthcoming quarters. Moreover, Washington Federal is gaining more market share through strategic acquisitions. Considering its strong capital and liquidity position, we believe that the company is well-poised to continue expanding through acquisitions.

Other Stocks Worth Considering

Some better-performing banks include 1st Century Bancshares, Inc. (FCTY - Snapshot Report), Banner Corporation (BANR - Snapshot Report) and Flushing Financial Corp. (FFIC - Snapshot Report). All these stocks carry a Zacks Rank #1 (Strong Buy).

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