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Reliant Bancorp (RBNC) Moves 6.4% Higher: Will This Strength Last?

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Reliant Bancorp shares soared 6.4% in the last trading session to close at $29.39. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 4.4% loss over the past four weeks.

Reliant Bancorp has extended its rally for the fifth consequent day. The yesterday’s rally was driven by the signing of merger agreement between United Community Banks, Inc. (UCBI - Free Report) and Reliant Bancorp. This will further expand United’s footprints in “high-growth southeastern markets” and the company will be ranked 10th in Tennessee for deposit market share, following the completion.

The all-stock deal is valued at roughly $517 million or $30.58 per share. The transaction, expected to close in the first quarter 2022, is still subject to Reliant Bancorp’s shareholders and regulatory approvals.

Under the terms of the deal, Reliant Bancorp shareholders will receive 0.9842 shares of United common stock for each share of Reliant Bancorp. The deal is expected to be 6.1% accretive to United's earnings in 2022 and 8.5% in 2023.

As Reliant Bancorp shot up to end the last trading session at $29.39, which is modestly lower than what United has offered, there is a still some upside left in the stock.

Both United and Reliant Bancorp are scheduled to release second quarter 2021 results on Jul 20. In conjunction to this, both banks come out with projections related to few important metrics. United anticipates earnings per share to be in the range of 77-80 cents, while Reliant Bancorp projects the same to be in 76-79 cents per share range. Also, both expects “solid second quarter loan growth” (excluding PPP loans). United expects negative loan loss provision of $13-$14 million, while Reliant Bancorp is not likely to report any provision in the to-be-reported quarter.

The Zacks Consensus Estimate for Reliant Bancorp is $0.71 per share for its upcoming quarterly report, which represents a year-over-year change of +18.3%. Revenues are expected to be $34.7 million, up 0.9% 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 Reliant 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 RBNC 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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