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Why PNC Financial (PNC) Should Be Added to Your Portfolio?

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During the Q4 earnings season, the Finance sector performed well. Despite inflation-related issues and heightening chances of political uncertainty, easing margin pressure, consumer loan growth, tax benefits from the tax reform and controlled expenses helped most banking stocks to perform well. Therefore, we can add some of these stocks to our portfolio based on the robust fundamentals and solid long-term growth opportunities.

The PNC Financial Services Group, Inc. (PNC - Free Report) is one such stock that not only beat estimates in Q4, but has also been witnessing upward estimate revisions, reflecting analysts’ optimism about its future prospects. Over the last 30 days, the Zacks Consensus Estimate for 2018 and 2019 moved up 3.8% and 4.6%, respectively.

Further, shares of this Zacks Rank #2 (Buy) stock have gained 15.9% over the last six months, outperforming 12.5% growth recorded by the industry.



Notably, PNC Financial has a number of other aspects that make it an attractive investment option.

Why PNC Financial is an Attractive Buy

Revenue Growth: PNC Financial continues to make steady progress toward improving its top line. The company's fee income has grown at a five-year CAGR (2013-2017) of 1.3%, with marginal fall recorded in 2016. The positive trend continued mainly on rising asset-management revenues and other income. Additionally, in 2017, the company reported a rise in net interest margin (NIM) and net interest income (NII), after witnessing a volatile trend for years since 2009.

The company’s projected sales growth (F1/F0) of 5.15% (as against the industry average of about 4.61%) indicates constant upward momentum in revenues.

Earnings Strength: Earnings are anticipated to display an upswing in the near term, as the company’s projected EPS growth (F1/F0) is 22.18% compared to the S&P 500 average rate of 16.2%. Also, PNC Financial recorded an average positive earnings surprise of 4.13%, over the trailing four quarters.

Prudent Expense Management: Though escalation in non-interest expenses was experienced in 2017 on rising personnel and equipment costs, expenses declined at a CAGR of 2.5% over the last five years (2012-2016). Furthermore, the company successfully realized its continuous improvement savings program (CIP) goals for the last three years (ended 2017) of about $1.25 billion. For 2018, management has a CIP target of $250 million.

Stock is Undervalued: PNC Financial has P/E and P/B ratios of 14.61 and 1.51 compared to the S&P 500 average of 17.26 and 3.15, respectively. Based on these ratios, the stock seems undervalued.

Other Stocks to Consider

Other top-ranked stocks in the same space are Comerica Incorporated (CMA - Free Report) , M&T Bank Corporation (MTB - Free Report) and Bank of America Corporation (BAC - Free Report) . Among these, Comerica and M&T Bank sport a Zacks Rank #1 (Strong Buy), while BofA carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Comerica’s earnings estimates have been revised 19.2% upward for 2018, in the past 60 days. Also, its share price has surged 27.8% over the last six months.

M&T Bank’s earnings estimates for full-year 2018 have been revised 22.6% upward, over the last 60 days. Further, over the last six months, the company’s shares have jumped 14.8%.

BofA witnessed nearly 15% upward earnings estimates revision for the current year, in 60 days’ time. Moreover, in the last six months, its shares have gained 24.2%.

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