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Bank OZK (OZK) Rides on Loans & Restructuring, Low Rates a Woe
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Bank OZK’s (OZK - Free Report) rising loan and deposit balance, and business restructuring initiatives are likely to continue supporting its financials in the quarters ahead. Moreover, the company’s capital-deployment activities reflect a strong balance-sheet position. However, elevated expenses and low interest rates are major near-term concerns.
Bank OZK’s organic growth looks impressive. While the company’s revenues declined in 2019, the same witnessed a compound annual growth rate (CAGR) of 15.3% over a six-year period (ended 2020), driven by decent loan and deposit growth. Also, the company’s strategic buyouts as well as business streamlining initiatives will likely stoke top-line growth.
Moreover, the company has a solid balance sheet. As of Mar 31, 2021, Bank OZK had total debt worth $1.1 billion, and cash and cash equivalents balance of $2.2 billion. In addition, its times interest earned of 27.4 at the end of first-quarter 2021 improved sequentially. Thus, given the bank’s decent earnings strength and solid liquidity position, it will be able to keep meeting debt obligations even if the economic situation worsens.
Further, the company’s robust capital position, lower debt equity and dividend payout ratios, compared with its peers, seem to support Bank OZK’s impressive capital deployments. In April 2021, it hiked the dividend for the 43rd consecutive quarter.
Additionally, analysts seem to have a bullish stance for the stock. The Zacks Consensus Estimate for both 2021 and 2022 earnings moved marginally upward, over the past seven days.
Further, shares of this Zacks Rank #3 (Hold) company have appreciated 43.6% over the past six months, outperforming the industry’s 38.8% growth.
Image Source: Zacks Investment Research
However, Bank OZK has been witnessing a contraction in the net interest margin (NIM) for the past several years. The NIM is expected to remain under pressure in the near term given the lower rates and the Federal Reserve signaling no hike in interest rates anytime soon.
Apart from this, the company’s mounting expenses on account of increasing salaries and rising employee benefits costs might deter bottom-line growth in the upcoming period. Total expenses witnessed a CAGR of 16.7% over the six-year period ended 2020. Costs are also likely to be elevated, given the company’s expansion into newer areas organically as well as through buyouts.
Key Industry Picks
A few better-ranked bank stocks are mentioned below:
Origin Bancorp, Inc. has witnessed an upward earnings estimate revision of 18.3% for 2021 over the past 60 days. This Zacks Rank #1(Strong Buy) stock has soared 55.3% over the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
First Internet Bancorp’s (INBK - Free Report) current-year earnings estimate moved up 19.4% in 60 days’ time. Further, the company’s shares have rallied 22% over the past six months. At present, it flaunts a Zacks Rank #1.
First Bancorp’s (FBNC - Free Report) ongoing-year earnings estimate moved 16.6% north in the past 60 days. In addition, the company’s shares have appreciated 27.5% in the past six months. Currently, it also sports a Zacks Rank of 1.
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Bank OZK (OZK) Rides on Loans & Restructuring, Low Rates a Woe
Bank OZK’s (OZK - Free Report) rising loan and deposit balance, and business restructuring initiatives are likely to continue supporting its financials in the quarters ahead. Moreover, the company’s capital-deployment activities reflect a strong balance-sheet position. However, elevated expenses and low interest rates are major near-term concerns.
Bank OZK’s organic growth looks impressive. While the company’s revenues declined in 2019, the same witnessed a compound annual growth rate (CAGR) of 15.3% over a six-year period (ended 2020), driven by decent loan and deposit growth. Also, the company’s strategic buyouts as well as business streamlining initiatives will likely stoke top-line growth.
Moreover, the company has a solid balance sheet. As of Mar 31, 2021, Bank OZK had total debt worth $1.1 billion, and cash and cash equivalents balance of $2.2 billion. In addition, its times interest earned of 27.4 at the end of first-quarter 2021 improved sequentially. Thus, given the bank’s decent earnings strength and solid liquidity position, it will be able to keep meeting debt obligations even if the economic situation worsens.
Further, the company’s robust capital position, lower debt equity and dividend payout ratios, compared with its peers, seem to support Bank OZK’s impressive capital deployments. In April 2021, it hiked the dividend for the 43rd consecutive quarter.
Additionally, analysts seem to have a bullish stance for the stock. The Zacks Consensus Estimate for both 2021 and 2022 earnings moved marginally upward, over the past seven days.
Further, shares of this Zacks Rank #3 (Hold) company have appreciated 43.6% over the past six months, outperforming the industry’s 38.8% growth.
However, Bank OZK has been witnessing a contraction in the net interest margin (NIM) for the past several years. The NIM is expected to remain under pressure in the near term given the lower rates and the Federal Reserve signaling no hike in interest rates anytime soon.
Apart from this, the company’s mounting expenses on account of increasing salaries and rising employee benefits costs might deter bottom-line growth in the upcoming period. Total expenses witnessed a CAGR of 16.7% over the six-year period ended 2020. Costs are also likely to be elevated, given the company’s expansion into newer areas organically as well as through buyouts.
Key Industry Picks
A few better-ranked bank stocks are mentioned below:
Origin Bancorp, Inc. has witnessed an upward earnings estimate revision of 18.3% for 2021 over the past 60 days. This Zacks Rank #1(Strong Buy) stock has soared 55.3% over the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
First Internet Bancorp’s (INBK - Free Report) current-year earnings estimate moved up 19.4% in 60 days’ time. Further, the company’s shares have rallied 22% over the past six months. At present, it flaunts a Zacks Rank #1.
First Bancorp’s (FBNC - Free Report) ongoing-year earnings estimate moved 16.6% north in the past 60 days. In addition, the company’s shares have appreciated 27.5% in the past six months. Currently, it also sports a Zacks Rank of 1.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>