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Acquisitions Drive BancorpSouth (BXS): Should You Hold?
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BancorpSouth Bank’s rising fee income, improving credit quality, rising margins, and investments through mergers and acquisitions (M&A) are the major driving factors. However, significant exposure to consumer mortgage and commercial real estate loans along with rising expenses are on the downside.
The company’s earnings estimates were revised 21% upward for the current year in the last 30 days. It currently carries a Zacks Rank #3 (Hold).
Shares of the company have rallied 19.6% over the past three months compared with 21.7% growth recorded by the industry.
BancorpSouth has been undertaking measures to improve its non-interest income. In the first two quarters of 2020, non-interest revenues increased on higher credit and debit card income along with a rise in deposit service charges. The company’s fee income is expected to continue rising in the quarters ahead, as lower interest rates are likely to support the mortgage segment’s performance, resulting in higher originations.
We remain encouraged by BancorpSouth’s ability to generate positive cash flows and enhance shareholders’ value through regular dividend payments and share repurchases.
As of Jun 30, 2020, the company held a debt of $971.8 billion, which has declined consistently in the past few quarters. Furthermore, its earnings before interest and tax are 14.2 times the interest expenses and have increased with some volatility in the past few quarters. With the record of consistent earnings, BancorpSouth has an advantageous position if the economic situation worsens.
Also, with a solid liquidity position, the company remains well-poised to undertake investments through M&As. It maintained an acquisition spree, fortifying footprint in various areas. The transactions are anticipated to continue to be accretive to earnings over the long run.
However, BancorpSouth’s non-interest expenses increased at a three-year CAGR of 11.4% during 2015-2019, with the trend continuing in the first six months of 2020 due to the impact of merger expenses and higher personnel expenses. Therefore, inorganic growth and digitization efforts may continue to lead to elevated expenses, going ahead.
Also, BancorpSouth’s credit quality deteriorated in 2020 due to the pandemic. Allowance for credit losses, net charge-offs and provisions increased from the last year. Though the company is consistently making efforts to reduce problematic assets, the asset quality is expected to remain strained on the coronavirus crisis.
First Internet Bancorp’s (INBK - Free Report) shares have lost 35% so far this year. Further, the company’s earnings estimates for the ongoing year have moved 3.2% north in the past 30 days. It currently sports a Zacks Rank of 2 (Buy).
Financial Institutions, Inc. (FISI - Free Report) has witnessed a 31.1% upward estimate revision over the past 30 days. The company’s shares have lost nearly 46% so far this year. It flaunts a Zacks Rank #1 at present.
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Acquisitions Drive BancorpSouth (BXS): Should You Hold?
BancorpSouth Bank’s rising fee income, improving credit quality, rising margins, and investments through mergers and acquisitions (M&A) are the major driving factors. However, significant exposure to consumer mortgage and commercial real estate loans along with rising expenses are on the downside.
The company’s earnings estimates were revised 21% upward for the current year in the last 30 days. It currently carries a Zacks Rank #3 (Hold).
Shares of the company have rallied 19.6% over the past three months compared with 21.7% growth recorded by the industry.
BancorpSouth has been undertaking measures to improve its non-interest income. In the first two quarters of 2020, non-interest revenues increased on higher credit and debit card income along with a rise in deposit service charges. The company’s fee income is expected to continue rising in the quarters ahead, as lower interest rates are likely to support the mortgage segment’s performance, resulting in higher originations.
We remain encouraged by BancorpSouth’s ability to generate positive cash flows and enhance shareholders’ value through regular dividend payments and share repurchases.
As of Jun 30, 2020, the company held a debt of $971.8 billion, which has declined consistently in the past few quarters. Furthermore, its earnings before interest and tax are 14.2 times the interest expenses and have increased with some volatility in the past few quarters. With the record of consistent earnings, BancorpSouth has an advantageous position if the economic situation worsens.
Also, with a solid liquidity position, the company remains well-poised to undertake investments through M&As. It maintained an acquisition spree, fortifying footprint in various areas. The transactions are anticipated to continue to be accretive to earnings over the long run.
However, BancorpSouth’s non-interest expenses increased at a three-year CAGR of 11.4% during 2015-2019, with the trend continuing in the first six months of 2020 due to the impact of merger expenses and higher personnel expenses. Therefore, inorganic growth and digitization efforts may continue to lead to elevated expenses, going ahead.
Also, BancorpSouth’s credit quality deteriorated in 2020 due to the pandemic. Allowance for credit losses, net charge-offs and provisions increased from the last year. Though the company is consistently making efforts to reduce problematic assets, the asset quality is expected to remain strained on the coronavirus crisis.
Stocks to Consider
Merchants Bancorp (MBIN - Free Report) has witnessed a 74% upward estimate revision over the past 30 days. The company’s shares have gained 0.9% so far this year. It flaunts a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
First Internet Bancorp’s (INBK - Free Report) shares have lost 35% so far this year. Further, the company’s earnings estimates for the ongoing year have moved 3.2% north in the past 30 days. It currently sports a Zacks Rank of 2 (Buy).
Financial Institutions, Inc. (FISI - Free Report) has witnessed a 31.1% upward estimate revision over the past 30 days. The company’s shares have lost nearly 46% so far this year. It flaunts a Zacks Rank #1 at present.
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>>