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UMB Financial (UMBF) Stock Up 36.8% YTD: More Upside Left?

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Shares of UMB Financial Corporation (UMBF - Free Report) have rallied 36.8%, year to date, compared with the industry’s and the S&P 500’s rally of 25.6% and 12.5%, respectively. This impressive price performance is backed by the bank’s focus on revenue growth by diversifying fee income sources, thereby supporting financials.

Further, increased optimism driven by an accelerated recovery of the banking industry, aided by an extensive vaccination drive, additional government spending and improving economic conditions favored the company’s price performance.

Moreover, this Zacks Rank #2 (Buy) stock has been witnessing upward earnings estimate revisions. Over the past 30 days, the Zacks Consensus Estimate for 2021 and 2022 moved north 26% and 10.2%, respectively.

Year-to-date Price Performance

Following factors are likely to support UMB Financial’s steady price appreciation.

Rising Loan and Deposit Balances: The key source of UMB Financial’s earnings stability is its organic growth trajectory. The company witnessed impressive average loan growth in the last five years (2016-2020), registering a CAGR of 4.3%. Also, deposits have seen a CAGR of 13% during the same time span. Though loan demand has been soft due to pandemic concerns, the same is likely to improve with the economic recovery and business activities resuming in full swing.

Solid Fee Income: Further, UMB Financial is benefiting from its focus on diversifying operations to non-interest sources of revenues, in order to reduce exposure to interest rates for balancing the unprecedented risks related to a low-rate environment. For the five-year period ended 2020, fee income witnessed a CAGR of 8.6%. Thus, the growing popularity of Health Savings Accounts will likely help boost income for its healthcare services segment in the near term.

Strong Capital Deployment: UMB Financial’s capital-deployment activities are notable. The company has been raising dividends on a regular basis. Notably, the latest hike of 3.2% was announced in September 2020, despite pandemic-related disruptions in business activities. Also, the bank has a share-repurchase plan in place. This April, management approved a share-repurchase program of up to 2 million shares. The company's capital-deployment activities look sustainable, given its favorable debt/equity ratio compared with the broader industry and consistent earnings growth profile.

Earnings Strength: UMB Financial’s earnings have witnessed a 13.4% rise in the past three-five years compared with the industry’s 10.88% growth. The momentum is anticipated to continue in the quarters ahead. The company’s long-term (three-five years) projected earnings growth rate of 17.8% promises rewards for shareholders.

Favorable Zacks Industry Rank: UMB Financial is part of that Zacks industry, which currently carries a Zacks Industry Rank #46 (placing it at the top 18% of more than 250 Zacks industries).The Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

Other Stocks to Consider

Commerce Bancshares, Inc. (CBSH - Free Report) has witnessed an 11.5% upward earnings estimate revision over the past 60 days. The company’s shares have gained 18.6% in the past six months. It holds a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

First Merchants Corporation’s (FRME - Free Report) shares have rallied 29.3% in six months’ time. Further, the company’s earnings estimate for the ongoing year moved 15.5% north in the past 60 days. The stock currently carries a Zacks Rank of 2.

The Zacks Consensus Estimate for the current year earnings for First Business Financial Services, Inc. (FBIZ - Free Report) , sporting a Zacks Rank #1, has been revised 43% upward in the past 60 days. The company’s share price has appreciated 33% in the past six months.

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