Webster Financial ( WBS Quick Quote WBS - Free Report) seems to be a profitable pick now based on its underlying strength and earnings growth prospects. The factors that indicate upside potential in the stock include an impressive organic growth story, improving credit quality and capital strength.
In addition, it has been successful in gaining analysts’ confidence. Its current-year earnings estimates have been revised 2% upward over the past 60 days. As a result, the stock carries a Zacks Rank #2 (Buy).
Shares of Webster have gained 50.4% over the past six months compared with the
industry’s growth of 51.5%. Why the Stock is Worth Buying Revenue Strength: Net interest income and non-interest income witnessed a compound annual growth rate (CAGR) of 5.5% and 2%, respectively, over the last five years (2016-2020), with some annual volatility.
Additionally, the upward trend is expected to continue in the near term, with support from Webster’s focus on bolstering fee income sources.
Inorganic Growth Strategies: Webster announced an all-stock merger of equals deal with Sterling Bancorp, in a bid to strengthen its commercial banking, health savings and consumer and digital banking business. The transaction, expected to close in the fourth quarter of 2021, is subject to customary closing conditions.
The deal is expected to be accretive to GAAP earnings in 2021, with more than 20% and 10% to Webster and Sterling shareholders, respectively.
Impressive Balance Sheet Growth: Webster’s loans and deposits witnessed a CAGR of 6.1% and 9.1%, respectively, over a five-year period (ended 2020). Further, both loan and deposit balances are likely to get support from an improving economy. Earnings per Share Growth: The company recorded an earnings growth rate of 11.1%, over the last three to five years compared with 10.9% for the industry it belongs to.
This earnings momentum is likely to continue in the near term as indicated by the company’s projected EPS growth rate of 31.4% and 21.4% for 2021 and 2022, respectively.
Superior Return on Equity: Webster has a return on equity of 10.78% compared with the industry average of 10.37%. This indicates that the company is slightly more efficient in utilizing shareholder funds. Strong Leverage: Webster’s debt/equity ratio is valued at 0.23 compared with the industry average of 0.25, indicating a relatively lower debt burden. It highlights the financial stability of the company even in adverse economic conditions. Other Stocks to Consider UMB Financial Corporation ( UMBF Quick Quote UMBF - Free Report) has been witnessing upward estimate revisions for the past 30 days. Additionally, the stock has jumped nearly 44% in the past six months. It currently carries a Zacks Rank of 2. You can see . the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here HarborOne Bancorp, Inc. ( HONE Quick Quote HONE - Free Report) has recorded upward earnings estimate revision for 2021 over the past 30 days. The stock, which has surged 42.8% over the past six months, currently carries a Zacks Rank #1. Synovus Financial ( SNV Quick Quote SNV - Free Report) has witnessed upward earnings estimate revision for the current year in the past 60 days. Shares of the company have rallied 67.9% over the past six months. At present, it carries a Zacks Rank of 1. Zacks Top 10 Stocks for 2021
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