BankUnited’s ( BKU Quick Quote BKU - Free Report) rising loan and deposit balance, and efforts to improve fee income, are likely to continue supporting its financials in the quarters ahead. Moreover, the company’s capital deployment activities reflect a strong balance sheet position. However, elevated expenses and low interest rates remain major near-term woes.
BankUnited’s organic growth remains impressive. While the company’s revenues declined in 2020 and 2019, the same witnessed a compound annual growth rate (CAGR) of 1% over a six-year period (ended 2020). Both loans and deposits are likely to keep gradually rising as the economy improves. This, along with company’s efforts to boost fee income and low-cost deposits, will likely keep supporting revenues.
As of Mar 31, 2021, the company had total debt worth $3.7 billion, and cash and cash equivalents balance of $1.1 billion. Nevertheless, BankUnited’s total debt declined 7% sequentially during first-quarter 2021. Also, its times interest earned of 4.8 at the first-quarter end improved sequentially. Thus, given the company’s decent earnings strength, it will be able to continue meeting debt obligations even if the economic situation worsens.
Apart from these, the company’s capital deployment initiatives look impressive. BankUnited announced a dividend hike of 10% for the first time in February 2020. In addition, the company has a share repurchase program in place, which was suspended due to the pandemic. Nonetheless, the same has been resumed in January this year. As of Mar 31, 2021, $37.6 million worth of buyback authorization remained. Given the company’s earnings strength, its efficient capital deployment activities seem sustainable.
Moreover, analysts seem to have a bullish stance for the stock. The Zacks Consensus Estimate for 2021 and 2022 earnings moved 14.2% and 3.2% upward respectively, over the past 60 days.
Further, shares of this Zacks Rank #3 (Hold) company have appreciated 60.2% over the past six months, outperforming the
industry’s 40.4% growth. Image Source: Zacks Investment Research
However, BankUnited has been witnessing a contraction in the net interest margin (NIM) for the past few years mainly due to lower interest rates. NIM is expected to remain under pressure in the near term as central bank has signaled no plans of raising interest rates anytime soon.
Also, the company’s mounting expenses on account of rising employee compensation and benefits costs, deposit insurance, and professional fees, might deter bottom-line growth in the upcoming period. Costs are also likely to be elevated, given the company’s steady technological investments.
Key Industry Picks
A few top-ranked stocks from the finance space are mentioned below:
East West Bancorp, Inc. ( EWBC Quick Quote EWBC - Free Report) has witnessed an upward earnings estimate revision of 16.9% for 2021 over the past 60 days. This Zacks Rank #1(Strong Buy) stock has soared 63.6% over the past six months.You can see .. the complete list of today’s Zacks #1 Rank stocks here First Internet Bancorp’s ( INBK Quick Quote INBK - Free Report) current-year earnings estimate moved up 19.4% in 60 days’ time. Further, the company’s shares have rallied 28.1% over the past six months. At present, it flaunts a Zacks Rank #1. Northfield Bancorp, Inc.’s ( NFBK Quick Quote NFBK - Free Report) ongoing-year earnings estimate moved 18.6% north in the past 60 days. In addition, the company’s shares have appreciated 46.5% in the past six months. Currently, it sports a Zacks Rank of 1. Zacks Names “Single Best Pick to Double”
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