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Meridian Bancorp (EBSB) Moves 23% Higher: Will This Strength Last?

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Meridian Bancorp shares ended the last trading session 23% higher at $21.92. The jump came on an impressive volume with a higher-than-average number of shares changing hands in the session. This compares to the stock's 3.7% loss over the past four weeks.

Meridian Bancorp extended its rally for the second consequent day and touched a new 52-week high of $22.85. The impressive rally was driven by the announcement of merger agreement between Independent Bank Corp. and Meridian Bancorp. The all-stock deal, expected to close in the fourth quarter 2021 and still subject to regulatory approval, is valued at $1.15 billion.

Under the terms of the deal, Meridian Bancorp shareholders will get 0.2750 shares of Independent Bank Corp. common stock for each share of Meridian Bancorp. Thus, Independent Bank Corp. is expected to issue nearly 14.2 million shares of its common stock in the merger.

As of Mar 31, 2021, Meridian Bancorp had $6.5 billion in total assets, $5.3 billion in loans, and $5.1 billion in deposits. Following the closure, Independent Bank Corp. will have approximately $20 billion in assets.

The transaction is expected to be nearly 23% accretive to Independent Bank Corp.’s earnings per share in 2022, assuming fully phased-in cost savings. Additionally, total pre-tax merger-related charges are expected to be roughly $64 million, which will be incurred this year.

This apart, Meridian Bancorp came out with solid first quarter 2021 performance. The company's earnings per share of 48 cents beat the Zacks Consensus Estimate of 42 cents. This also compared favorably with prior-year quarter's earnings of 25 cents. Results were supported by rise in net interest income, fee income and provision benefits, while lower loan balance and rise in expenses were the headwinds.

Price and Consensus

Price Consensus Chart for EBSB

This holding company for East Boston Savings Bank is expected to post quarterly earnings of $0.41 per share in its upcoming report, which represents a year-over-year change of +20.6%. Revenues are expected to be $52.1 million, down 7% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For Meridian Bancorp, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on EBSB going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

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