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Old National Bancorp

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Old National Bank (ONB)

Old National Bank is one of those companies that you probably never heard of and if it weren’t for TARP and the warrants that were issued in conjunction with TARP, I would have most likely overlooked it as well.

Back in 2009, ONB was given a gracious gift by the government in the form of a cheap buyback of their warrants.  In short, the bank was able to buy back their stock warrants that were owned by the treasury for about 20% of their real value, saving them millions of dollars. This ended up costing the taxpayer, but all worked out well for this regional bank.

Three years later, ONB is being recognized by the Ethisphere Institute as one of the World's Most Ethical Companies (not that they did anything wrong with TARP) and has been delivering strong earnings results over the past year.  In the financial sector, regionals like ONB are sometimes preferred because they don't typically carry the same risks as thier much larger multi-national peers. 

Company Description & Developments
Headquartered in Evansville, Indiana, Old National Bancorp is the largest financial services bank holding company headquartered in Indiana with assets of $8.6 billion. The company boasts a 178-year history of solid performance as an Indiana bank.

They own multiple financial services operations in Indiana, Illinois, and Kentucky and offer a range of financial services that include commercial and retail banking, trust, brokerage, correspondent banking, and insurance.

In January, ONB Old National Bancorp increased their cash dividend 28.6% to 09 cents per quarter  and approved a 2 million share stock repurchase plan for the next year.

Financial Profile
ONB is a small-cap (1.20 billion) company that is trading at about 12.82 times forward (expectations for next quarter) earnings and has a PEG ratio of 3.2.  ONB has been a Zacks Rank 1 strong buy since April 3rd.  

Total sales increased 36% compared to the same period in 2010; earnings increased from $0.44 in FY2010 to $0.76 in FY2011.  They are expected to earn $0.99 for the full year (FY2012) according to the Zacks Consensus Estimate. 

Earnings Estimates
Of the 11 analysts who cover Old National, the consensus is for the company to grow earnings by 30.38% in the current year (FY2012) and roughly 9% in FY2013.  The financial services company has exceeded analysts’ expectations to the upside 4 quarters in a row; with an average upside surprise of 26.29% over the past year.   

In terms of the magnitude of analyst estimate trends, we are seeing all of the consensus estimates the same or higher than they were 90 days ago for the current and next quarter as well as FY2012 and FY2013. Positive adjustments to earnings estimates have been minor.  ONB is expected to earn 24 cents when they report on April 30th.

Market Performance & Technicals
Old National’s stock has risen over 50% since October 2011 lows. The stock has only breached its 50 moving average twice since eclipsing it on October 4th. 

Shares still remain above both the 50 and 200 day moving averages of $12.40 and $11.09 respectively.  Look for support at both of those levels and in between them at $11.70 area

Volume is moderate and has been averaging 550k daily.  ODFL has outperformed the S&P 500’s performance over the past year by more than 13%.  It lagged it by almost 2% in the past 3 months, but outperformed the index last month by almost 3%.

Jared A Levy is the Momentum Stock Strategist for He is also the Editor in charge of the market-beating Zacks Whisper Trader Service.


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