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Is It Advisable to Add M&T Bank (MTB) to Your Portfolio?
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The Finance sector was one of the best performers in the Q1 earnings season. Despite rising chances of political uncertainty, we can add some banking stocks to our portfolio based on the banks’ strong fundamentals and solid long-term prospects. Moreover, easing of regulations, financial stability and tax reform are expected to yield improved profitability for banks.
With organic and inorganic growth strategies, as well as a robust capital position, M&T Bank Corporation (MTB - Free Report) appears to be one such stock. The company’s focus on the most attractive business mixes in the banking industry to tackle macroeconomic headwinds and strategic priorities, including core technology infrastructure, is anticipated to yield positive results for the stock.
M&T Bank beat estimates in the first quarter, though the Zacks Consensus Estimate remained unchanged for 2018, over the last 30 days. However, the Zacks Consensus Estimate for 2019 inched up, reflecting analysts’ optimism about the company’s future prospects, during the same time frame.
Further, shares of this Zacks Rank #2 (Buy) company have gained around 9.6% over the past year compared with 12.8% growth recorded by the industry it belongs to.
Notably, M&T Bank has a number of other aspects which make it an attractive investment option.
Why M&T Bank is a Must Buy
Revenue Growth: M&T Bank continues to make steady progress toward bolstering its revenues. Since 2008, the company has recorded a continued rise in net interest income. Over the past five years (ended December 2017), it has grown at a compound annual growth rate (CAGR) of nearly 9%, with the trend continuing in the first quarter of 2018 as well.
The company’s projected sales growth (F1/F0) of 4.47% indicates constant upward momentum in revenues.
Earnings Per Share Strength: Earnings are anticipated to display an upswing in the near term, as the company’s projected EPS growth (F1/F0) is 33.41% compared to the industry average rate of 31.28%. Also, M&T Bank recorded an average positive earnings surprise of 3.96%, over the trailing four quarters.
Inorganic Growth Routes: Given its robust liquidity position, M&T Bank is well positioned to grow on the back of acquisitions. The growth has been reflected in the company’s accomplishment of several major acquisitions in and out of the United States, in the past several years. The completion of the merger with Hudson City in November 2015 expanded the company’s retail branch network in the Eastern United States, with access to 135 Hudson branches, situated primarily in New Jersey. Furthermore, product and balance-sheet diversification, stemming from the acquisition, will likely support the company’s top line.
Steady Capital Deployment: M&T Bank’s capital-deployment activities remain impressive. The company’s 2017 capital plan was approved by the Fed. The plan included share buyback of up to $900 million over the four-quarter period, effective July 2017. Notably, in February 2018, it announced an additional share buyback plan of up to $745 million. The latest quarterly common stock dividend hike was 7% in May 2018. Notably, the bank has cleared the 2018 stress test and awaits capital plan approval.
Stock is Undervalued: The stock currently has a Value Score of B. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of “value traps” and identify stocks that are truly trading at a discount. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.
Strong Leverage: M&T Bank’s debt/equity ratio is valued at 0.59 compared to the industry average of 0.92, indicating relatively lower debt burden. It highlights the financial stability of the company even in adverse economic conditions.
Stocks to Consider
Fifth Third Bancorp (FITB - Free Report) has been witnessing upward estimate revisions for the last 30 days. Additionally, the stock jumped over 23% in the past year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Old Second Bancorp, Inc. (OSBC - Free Report) has been witnessing upward estimate revisions for the last 60 days. Also, the company’s shares have risen nearly 35.4% over the past year. It holds a Zacks Rank #2, at present.
Comerica Incorporated (CMA - Free Report) has been witnessing upward estimate revisions for the last 30 days. Over the past year, the company’s share price has been up more than 33%. It also carries a Zacks Rank #2.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Is It Advisable to Add M&T Bank (MTB) to Your Portfolio?
The Finance sector was one of the best performers in the Q1 earnings season. Despite rising chances of political uncertainty, we can add some banking stocks to our portfolio based on the banks’ strong fundamentals and solid long-term prospects. Moreover, easing of regulations, financial stability and tax reform are expected to yield improved profitability for banks.
With organic and inorganic growth strategies, as well as a robust capital position, M&T Bank Corporation (MTB - Free Report) appears to be one such stock. The company’s focus on the most attractive business mixes in the banking industry to tackle macroeconomic headwinds and strategic priorities, including core technology infrastructure, is anticipated to yield positive results for the stock.
M&T Bank beat estimates in the first quarter, though the Zacks Consensus Estimate remained unchanged for 2018, over the last 30 days. However, the Zacks Consensus Estimate for 2019 inched up, reflecting analysts’ optimism about the company’s future prospects, during the same time frame.
Further, shares of this Zacks Rank #2 (Buy) company have gained around 9.6% over the past year compared with 12.8% growth recorded by the industry it belongs to.
Notably, M&T Bank has a number of other aspects which make it an attractive investment option.
Why M&T Bank is a Must Buy
Revenue Growth: M&T Bank continues to make steady progress toward bolstering its revenues. Since 2008, the company has recorded a continued rise in net interest income. Over the past five years (ended December 2017), it has grown at a compound annual growth rate (CAGR) of nearly 9%, with the trend continuing in the first quarter of 2018 as well.
The company’s projected sales growth (F1/F0) of 4.47% indicates constant upward momentum in revenues.
Earnings Per Share Strength: Earnings are anticipated to display an upswing in the near term, as the company’s projected EPS growth (F1/F0) is 33.41% compared to the industry average rate of 31.28%. Also, M&T Bank recorded an average positive earnings surprise of 3.96%, over the trailing four quarters.
Inorganic Growth Routes: Given its robust liquidity position, M&T Bank is well positioned to grow on the back of acquisitions. The growth has been reflected in the company’s accomplishment of several major acquisitions in and out of the United States, in the past several years. The completion of the merger with Hudson City in November 2015 expanded the company’s retail branch network in the Eastern United States, with access to 135 Hudson branches, situated primarily in New Jersey. Furthermore, product and balance-sheet diversification, stemming from the acquisition, will likely support the company’s top line.
Steady Capital Deployment: M&T Bank’s capital-deployment activities remain impressive. The company’s 2017 capital plan was approved by the Fed. The plan included share buyback of up to $900 million over the four-quarter period, effective July 2017. Notably, in February 2018, it announced an additional share buyback plan of up to $745 million. The latest quarterly common stock dividend hike was 7% in May 2018. Notably, the bank has cleared the 2018 stress test and awaits capital plan approval.
Stock is Undervalued: The stock currently has a Value Score of B. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of “value traps” and identify stocks that are truly trading at a discount. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.
Strong Leverage: M&T Bank’s debt/equity ratio is valued at 0.59 compared to the industry average of 0.92, indicating relatively lower debt burden. It highlights the financial stability of the company even in adverse economic conditions.
Stocks to Consider
Fifth Third Bancorp (FITB - Free Report) has been witnessing upward estimate revisions for the last 30 days. Additionally, the stock jumped over 23% in the past year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Old Second Bancorp, Inc. (OSBC - Free Report) has been witnessing upward estimate revisions for the last 60 days. Also, the company’s shares have risen nearly 35.4% over the past year. It holds a Zacks Rank #2, at present.
Comerica Incorporated (CMA - Free Report) has been witnessing upward estimate revisions for the last 30 days. Over the past year, the company’s share price has been up more than 33%. It also carries a Zacks Rank #2.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>