Back to top

Image: Bigstock

4 Reasons to Bet on Webster Financial (WBS) Stock Right Now

Read MoreHide Full Article

With the economic and industry factors turning in favor of finance stocks, we have selected Webster Financial Corporation (WBS - Free Report) for your consideration.

This Zacks Rank #2 (Buy) bank displays earnings growth potential on the back of continued growth in loans and deposits, which will further aid profitability. Also, top-line strength and ample liquidity keep us encouraged.

Shares of Webster Financial have gained 5.5% year to date, outperforming the industry’s negative growth of 0.9%.

Further, the stock has seen the Zacks Consensus Estimate for current-year earnings being revised upward by one cent per share over the last 60 days.

What Makes the Stock Attractive

Earnings Growth: While Webster Financial’s historical earnings per share (EPS) growth rate of 5.2% compares unfavorably with the industry average of 8.5%, investors should really focus on the projected EPS growth (F1/F0). Here, the company is looking to grow at a rate of 20.3%, substantially higher than the industry average of 10.9%. Further, the long-term (three-five years) expected EPS growth of 10.4% promises rewards for the shareholders.

Moreover, the company delivered an average positive earnings surprise of 7.3% in the trailing four quarters.

Revenue Growth: Webster Financial has an impressive revenue-growth story. Net interest income has witnessed a compound annual growth rate (CAGR) of 5.5%, over the last five years (2012-2016). The company’s revenues should keep strengthening with rising interest rates. Also, the top line is expected to increase 9.5% in 2017 compared with nil growth for the industry.

Superior Return on Equity (ROE): The company’s ROE of 9.9% compares favorably with the industry’s ROE of 8.6%, reflecting its efficiency in utilizing shareholders’ funds.

Healthy balance sheet: Webster Financial has a healthy balance sheet position. Deposits recorded a five-year (2012-2016) CAGR of 7.4%, aided by rising non-interest-bearing deposits. In addition, the company witnessed impressive loan growth in the same time span, recording a CAGR of 9.2%. Also, it remains focused on achieving 10% annual loan growth in 2017.

Other Stocks to Consider

Some other top-ranked stocks from the same space are ConnectOne Bancorp (CNOB - Free Report) , First Commonwealth Financial Corporation (FCF - Free Report) and S&T Bancorp (STBA - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ConnectOne Bancorp has seen the Zacks Consensus Estimate for current-year earnings being revised upward by 13.6% in the last 60 days. The company’s share price has risen almost 3.5%, so far this year.

First Commonwealth’s current-year earnings estimates have been revised 2.5% upward over the last 60 days. Also, its shares have climbed 4.8% year to date.

The Zacks Consensus Estimate for S&T Bancorp’s current-year earnings has moved up by one cent per share in the last 60 days. So far this year, its share price has grown 4.5%.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

Published in