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American River (AMRB) Surges 21.7%: Is This an Indication of Further Gains?

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American River (AMRB - Free Report) shares soared 21.7% in the last trading session to close at $19.90. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 4.1% gain over the past four weeks.

American River extended its rally for the second consequent day and touched a new 52-week high of $21.08 at the open. The impressive rally was driven by the announcement of merger agreement between Bank of Marin Bancorp and American River. The all-stock deal, expected to close in the third quarter 2021 and still subject to regulatory approval, is valued at $134.5 million.

Under the terms of the deal, American River shareholders will get 0.575 shares of Bank of Marin Bancorp common stock for each share of American River. Thus, American River shareholders will own roughly 20.5% of the combined company.

Upon closure, the transaction is expected to be immediately accretive to Bank of Marin Bancorp’s earnings and 14.2% accretive to 2022 earnings (fully phased-in cost savings). The deal is expected to result in cost savings of nearly $6.1 million. Further, Bank of Marin Bancorp will have roughly $4 billion in assets and operate 31 branches in 10 counties across the Greater Sacramento, Amador and Sonoma County regions.

This apart, American River came out with solid first quarter 2021 performance. The company's earnings per share of 45 cents beat the Zacks Consensus Estimate of 37 cents. This also compared favorably with prior-year quarter's earnings of 24 cents.

Price and Consensus

Price Consensus Chart for AMRB

This parent company of American River Bank is expected to post quarterly earnings of $0.37 per share in its upcoming report, which represents a year-over-year change of +54.2%. Revenues are expected to be $7.5 million, up 13% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For American River, the consensus EPS estimate for the quarter has been revised 2.9% higher over the last 30 days to the current level. And a positive trend in earnings estimate revision usually translates into price appreciation. So, make sure to keep an eye on AMRB going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 2 (Buy). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

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